Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — ENVIRONMENT

Urban Policy

Mr. Dowd: To ask the Secretary of State for the Environment if he will make a further statement on his plans for future initiatives on urban policy.

The Secretary of State for the Environment (Mr. Michael Howard): We will continue to support the regeneration of our cities through encouraging private investment and using public resources effectively. That is why I announced today my proposals for promoting growth along the east Thames corridor, which will be of great benefit to Lewisham and south-east London.

Mr. Dowd: I thank the Secretary of State for that reply. It will go down very thinly in Lewisham because of the damage caused by the right hon. and learned Gentleman's statement in November. Does he recall that it was his Department which asked the London borough of Lewisham to prepare bids for the urban programme last year, that that was done at a cost of many tens of thousands of pounds and that his November statement rendered the exercise completely worthless? Despite his assurance that the money would not be wasted because the borough could apply for urban partnership, not one penny piece has come to Lewisham, with the net result that 1,500 jobs and training places have been lost. Are not his assurances about the urban programme completely worthless, in accordance with the Government's statement on taxation, and does not he continue to do immense damage to the prospects of the people of Lewisham and urban areas generally across the country?

Mr. Howard: Urban partnership, to which the hon. Gentleman referred, is a competitive programme and Lewisham was not successful in that competition. However, it was successful in the competition for city challenge, which is a far bigger programme and from which the borough of Lewisham is receiving £37·5 million over five years. That is attracting larger sums of private sector investment. It is absolutely disgraceful for the hon. Gentleman to ask a question about resources in Lewisham without mentioning city challenge. We are accustomed to Opposition Members selling the country short. The hon. Gentleman is selling his own borough short.

Mr. Alan Howarth: May I encourage the Government to retain the city challenge programme? Even if the precise expenditure under the programme in future years cannot

at this stage be determined, will my right hon. and learned Friend confirm that the Government intend to build on the achievements of city challenge in mobilising the varied resources of inner-city communities in a new and constructive spirit of partnership?

Mr. Howard: I am grateful to my hon. Friend for his support. City challenge has revolutionised the approach to partnership between central Government and local authorities by escaping from the dead hand of routine and encouraging authorities to examine from scratch the way in which resources can be most effectively deployed. I shall certainly take my hon. Friend's remarks into account in considering how we are to take the programme further.

Mr. Mackinlay: Does the Secretary of State accept that it is a gross discourtesy to the House and to hon. Members who represent Kent, Essex and east London constituencies that he has not made a full statement to the House about the east Thames corridor instead of announcing it at a press conference this morning? Will he also note that while the east Thames corridor documents trail an expansion of housebuilding in the east which, of course, is welcome, the problem is not a shortage of planning permission for housing development in east London, but a shortage of customers and the inability of local authorities to once more build homes for families?

Mr. Howard: I certainly do not accept that there was any discourtesy. It is not customary to make oral statements to the House on planning guidance of that kind. I took steps to ensure that hon. Members, including the hon. Gentleman, knew in advance that the documents would be available in the Library this morning at precisely the same time as I gave my press conference, because I was anxious for hon. Members to be fully informed. The hon. Gentleman spoke about customers for houses. We know that the Labour party does not look any further than its nose, but the purpose of the guidance that I issued this morning was to plan for the future and for recovery. That is exactly what we shall do.

Mrs. Gorman: I congratulate my right hon. and learned Friend on his announcement today of the task force to examine developments in the Thames corridor, which will be most welcome to my constituents. Housing developments throughout my constituency have restarted, so, when I cast my eyes around, I see that there is obviously regrowth and regeneration in the economy. We have many thriving industries in the docks, in Shell and at Ford Dagenham which are only seeking the opportunity for redevelopment. That will come with the kind of interest that my right hon. and learned Friend is taking in our part of the world.

Mr. Howard: I pay tribute to my hon. Friend's acute powers of observation, for which she is renowned. Using those acute powers, my hon. Friend has seen evidence of recovery all around her and her constituents. Those signs will become increasingly apparent over the weeks and months ahead.

Mr. Vaz: Why does not the Secretary of State have the courage to admit that if his future initiatives, including that which he announced today, are anything like his past urban policy initiative they will be a complete disaster? Have not the Government learnt the lessons of docklands? Given the Government's humiliating defeat in the vote on


the Committee of the Regions, will the right hon. and learned Gentleman bow to democracy and give the House an assurance that people in the east London corridor and in inner-city areas will be properly represented on any bodies, structures or organisations which the right hon. and learned Gentleman creates through their democratically elected local councillors, not through the Secretary of State's stooges and puppets?

Mr. Howard: If the hon. Gentleman had taken trouble to study the announcement that I made this morning, he would know that the whole purpose of the task force that I have established in the east Thames corridor is to work together with the area's 16 local authorities, to help them to co-ordinate their efforts and to put in place the framework necessary to make sure, for the benefit of the people in the area, that we take the greatest advantage of the opportunities that the area has to offer. I am confident that, in time, we shall all benefit from the results of that exercise.

House Building

Mr. Milligan: To ask the Secretary of State for the Environment how many houses will be provided in Hampshire as a result of the measures announced in the autumn statement.

The Minister for Housing, Planning and Construction (Sir George Young): Housing associations will purchase some 18,000 additional homes in England using the £577 million allocated for that purpose in the autumn statement. That is a very great achievement, exceeding by 2,000 the target of 16,000 homes set in November. I congratulate heartily the Housing Corporation and the 80 associations involved. Purchases have been widely spread across the country, with acquisitions in some 97 per cent. of local authority areas. More than 800 of those new homes will be in Hampshire. We hope that grants to local authority and housing association tenants will enable some 3,500 to become owner-occupiers, freeing their current homes for those in need. Latest estimates suggest that more than 200 may be in Hampshire. Overall, well over 20,000 families in England will benefit from permanent new homes.

Mr. Milligan: Is my hon. Friend aware that Swaythling housing association believes that his measures will house 2,500 people in Hampshire this year? In my constituency, the number of people in temporary accommodation has halved in the past three months as a direct result of my hon. Friend's measures. In addition, extra Government aid has enabled my council to increase by one fifth the money spent on housing development, and proposed rent rises have been halved as a result of Government aid. Is not that proof positive that, despite the Opposition's claims, the Government are implementing practical measures to help the homeless and those in council accommodation?

Sir George Young: The House will take heart from the encouraging news from my hon. Friend's constituency, which is replicated throughout the country. The number of families in bed-and-breakfast accommodation has fallen 38 per cent. over the past 12 months and that is a substantial achievement. In Hampshire, the Housing Corporation has approved allocations for projects next

year totalling almost £29 million. We are determined to maintain the momentum and to continue to make progress on all housing fronts.

Mr. Denham: Does the Minister accept that short-term measures, however welcome—and I welcome every additional home for rent—will not tackle the fundamental housing problem? Does he accept that the Government were responsible for a fall in the number of new homes to rent in Hampshire from 1,000 in 1988 to 462 in 1991? In the most recent year, well over 3,000 households in Hampshire became homeless. Existing measures must be expanded and sustained at a much higher level if homelessness is to be eradicated. What assurances can the Minister give the House that the type of measures taken will not be a flash in the pan, but will be expanded and sustained in future years?

Sir George Young: On the question of expansion, the output of housing associations is forecast to rise from 27,000 units in 1991–92 to more than 65,000 this year. That is a substantial improvement. As for homelessness, I hope that the hon. Gentleman will take comfort from the fact that, over the past 12 months, the number of people accepted as homeless by local authorities has fallen by 2 per cent. It is the first time in 17 years that we have seen a reduction in homeless acceptances.
I hope that the hon. Gentleman will recognise that there are good signs on the horizon and that the rather gloomy picture that he has painted does not represent what is really happening.

Mr. Malone: Will my hon. Friend confirm that the measures that his Department announced today about Hampshire's structure plans should be viewed along with the measures announced in the autumn statement, as they will have an equally significant effect on housing in Hampshire? Will he note that there is great relief in Hampshire following the news that no new settlement is to be imposed as a means of creating additional housing in the county and will he accept the thanks of the county council?

Sir George Young: I can confirm that the announcement made today by my right hon. and learned Friend, announcing regional guidance for Hampshire, makes it clear that a new settlement will not be required during the plan period to 2001. I note that that news has been accepted with relief by my hon. Friend's constituents.

Mr. Battle: Is the Minister aware that, as a result of the Government's proposed reduction in housing association grant rates to 55 per cent.—announced in the autumn statement and since—rents are set to rise to more than 39 per cent. of tenants' incomes? Is he aware that the number of housing association tenants on housing benefit will rise to 89 per cent. by 1996? According to UBS Phillips and Drew, pensioners in Hampshire, Shropshire and Hereford will find that they have to spend 61 per cent. of their incomes on rent. Will not that totally undermine any common-sense understanding of the Government's declared intention of providing affordable housing through the housing associations—or will the Minister reassure us that those huge rent increases will be met by massive housing benefit increases?

Sir George Young: I reject the alarmist propaganda that the hon. Gentleman has just revealed to the House. He


knows perfectly well that no decisions on grant rates for 1994–95 have been made; when they are made, we shall bear in mind the important question of affordability.
Grant rates for the coming year have indeed been reduced, from 72 to 67 per cent., but, because of falling interest rates, lower land values and more competitive tenders, that will have no significant impact on rents. It will enable us to produce 3,300 more units, which is precisely what the hon. Member for Southampton, Itchen (Mr. Denham) advocated.

Mr. Colvin: How many more homes might have been provided in Hampshire if the Budget had done more to assist the private rented sector? If my constituency is anything to go by, there are about 10,000 empty dwellings in the county. I acknowledge the importance of building new houses, both for owner-occupation and to rent, but is not it equally important to make use of the private rented sector when so many dwellings are empty?

Sir George Young: My hon. Friend is absolutely right. Those 10,000 empty units represent a resource which must be returned to use. My right hon. and learned Friend and I are examining proposals to revive the private rented sector further and to restore incentives for property owners to make their accommodation available for rent, so that we can make more progress in tackling the housing problems in my hon. Friend's constituency.

Water Quality (Bassenthwaite)

Mr. Campbell-Savours: To ask the Secretary of State for the Environment, pursuant to his oral answer of 27 January, Official Report, column 1029, what further developments have taken place in respect of management of water quality in Bassenthwaite.

The Minister for the Environment and Countryside (Mr. David Maclean): I understand that the hon. Member had a useful meeting and follow-up with the National Rivers Authority. The NRA's study of water quality in Bassenthwaite is continuing and will enable the authority to establish whether improvements are required.

Mr. Campbell-Savours: I also had a useful and helpful meeting with North West Water. May I have an assurance that no administrative, procedural or bureaucratic obstacles will delay whatever proposals North West Water presents with a view to sorting out the problems in Bassenthwaite?

Mr. Maclean: I, too, would deplore any unnecessary administrative or bureaucratic delays. The best way to avoid any bureaucratic delays in the future is to have this conclusive study conducted by the NRA, with which no one can disagree. If, following that study, the NRA should request North West Water to take remedial action, I would not anticipate any bureaucratic delays.

Local Authorities (Spending Levels)

Mr. Byers: To ask the Secretary of State for the Environment what plans he has to allow local authorities to determine their own spending levels.

Mr. Howard: It is for each local authority to set its own budget, taking account of all appropriate considerations, including any provisional criteria for capping which have been announced.

Mr. Byers: That is a particularly disappointing reply, even from this Secretary of State. Is he aware that, because of the severe capping regime being forced on local government, about 35,000 jobs have been lost in local councils in just the past few weeks and that, as a result, there have been deep and damaging cuts in vital local services? Does the Secretary of State agree that if there is to be the renaissance of local government promised a few weeks ago by the Prime Minister, it must entail giving local people the freedom to determine the level of local services, instead of the present interference from Whitehall?

Mr. Howard: I certainly do not accept that there have been the job losses to which the hon. Gentleman refers. He is referring to the estimates which we always hear at this time of year and which are rarely translated into practice. What clearly emerges from his question is that he and his hon. Friends are prepared to remove all constraints from local authority spending and to see it go through the roof. That is a message which we shall take to every home in the shire districts of England in the forthcoming county council election campaign.

Mr. Robert B. Jones: Does my right hon. and learned Friend agree that councils that set budgets that are indifferent to the plight of those who have to pay the council tax towards those budgets are not providing good leadership for their areas? Is not it the brutal truth that the vast majority of the local authorities that come up against the capping criteria are Labour or Labour and Liberal authorities, which are indifferent to the people who live in their area?

Mr. Howard: My hon. Friend is entirely right. The attitude that the Opposition take to this question is entirely typical of their lack of concern for those who have to pay the bills.

Mr. Straw: Has not the Secretary of State seen the Audit Commission's draft report entitled "Passing the Bucks", which wholly damns his disreputable standard spending assessment system as being "neither simple…nor stable". It states that it does not provide a standard level of service, that SSAs are now
being used for tasks"—
such as capping—
for which they were not originally designed",
and that they are confusing accountability between central and local government. How can he justify a system which claims that the Prime Minister's Huntingdonshire is more deprived than Chester-le-Street and that Bournemouth is more deprived than Barnsley? Is not the only explanation for such perverse outcomes that he has gerrymandered the system to suit his party? Does not he understand that the credibility of the whole system can be restored only if grant allocation is taken from his partisan hands and given to art independent grant commission, reporting via the Select Committee to the House?

Mr. Howard: I thought that the hon. Gentleman was going to rise to confess at last that all his dire predictions about the council tax had been mistaken, that his prophecies of doom and gloom about the council tax in the past few months had been without foundation and that he had been entirely wrong.
The hon. Gentleman knows very well that we are going to undertake a fundamental review of the SSA system in time for the next settlement. I invite him and his colleagues


to make representations to us in the context of that review. We know from experience that there will be as wide a variety of views expressed by members of the Labour party about what should happen as there will be from any other source.

Mr. Knapman: Will my right hon. and learned Friend confirm that few councils want to spend more than their SSAs and that most council tax payers want to be protected from the ambitions of high-spending councils? Will he also bear in mind the fact that if Oxfordshire can be in the south-east for area cost adjustment purposes, Gloucestershire would like to be in the south-east for those purposes, too?

Mr. Howard: I understand the concern that my hon. Friend expresses on behalf of Gloucestershire and I certainly agree that people want to be protected from high-charging councils and that Conservative councils, on the whole, do not wish to spend beyond their capping limits. However, I cannot extend my agreement with my hon. Friend to cover Labour-controlled councils. If given the chance, they would undoubtedly spend beyond their capping limits and would be encouraged to do so by the Labour party, with total disregard for the interests of the people who live in those areas.

Nuclear Industry

Mr. McAllion: To ask the Secretary of State for the Environment what plans he has to meet environmental groups in the near future to discuss the impact on the environment of the nuclear industry in the United Kingdom.

Mr. Maclean: I have no such plans.

Mr. McAllion: Is the Minister aware that the President of the Board of Trade once described Magnox nuclear power stations as old and unsafe? Is he also aware that the nuclear installations inspectorate has identified serious safety problems in five Magnox stations and that there is therefore a risk of a serious accident? Will he explain to the House why he has allowed Nuclear Electric to continue to operate those stations far beyond their design life and why, in view of the serious safety problems, he has not ordered their immediate closure?

Mr. Maclean: I am also aware that we have the toughest regulatory framework in the world for our whole nuclear industry, which operates only if the independent inspectorate believes that it is safe for it to do so.

Mr. Whittingdale: Does my hon. Friend agree that nuclear power stations are the most environmentally friendly means of generating electricity and are responsible for producing virtually no greenhouse gases? Does he further agree that early closure of the Magnox nuclear power stations, such as Bradwell in my constituency, would make it more difficult for us to meet the targets set by the Rio convention?

Mr. Maclean: My hon. Friend is right. The nuclear power industry makes no contribution to our CO2 and greenhouse gas problems—[HON. MEMBERS: "Rubbish!"] The authentic voice of the Labour party is emerging—it opposes nuclear power. Labour Members should talk to one or two of their hon. Friends, especially the shadow Foreign Secretary. He may put them right.

Mr. Simon Hughes: Is the Minister aware that his answer to the question reveals that the Government have no plans to discuss the White Paper after its production tomorrow until it comes to the House for a vote next week? That shows that the White Paper is meant to be a general fiddle, as well as a quick fix. The implications for the environment, energy use, employment and the economy are meant to be obscured, as the Government make a dash for safety and buy the votes of their Back Benchers. When we are asked to consider the future of the coal industry, we shall not even have the chance to consider the finances of the nuclear industry. Is not that madness, as well as a fiddle?

Mr. Skinner: So why did you vote for the Government?

Mr. Maclean: Far be it from me to suggest that the hon. Member for Bolsover (Mr. Skinner) may have made a valid point, too. Perhaps the hon. Member for Southwark and Bermondsey (Mr. Hughes) should concentrate more on the facts, instead of preparing sound bites for question time.

Local Government Corruption

Mr. Booth: To ask the Secretary of State for the Environment what action he has taken to curb fraud and corruption in local government.

The Parliamentary Under-Secretary of State for the Environment (Mr. Robin Squire): The prevention and detection of fraud and corruption is the responsibility of the members and senior management of local authorities, with the support of the auditor. Where the system has failed, the police also have a role to play. I welcome the recent announcement by the Audit Commission of a study into fraud and corruption and if the study finds that local authorities or auditors need new powers I will certainly be willing to consider its proposals.

Mr. Booth: In view of the widespread and worrying expansion of corruption, extending to places such as Hackney, where fraud worth £40 million has been reported, will the Minister tell the House whether his proposals will cover incentives and protection for the people who have the courage to expose those practices? Will his study of malpractice cover contracting out by local authorities and all that has happened in that connection under Labour local authorities?

Mr. Squire: I trust that I speak for the whole House when I say that we share my hon. Friend's concern about fraud, wherever it occurs. On my hon. Friend's serious point about the risks that may be run by whistle blowers, as I think they are called, if there is any evidence that further protection is needed I will examine it carefully. On the wider powers in respect of compulsory competitive tendering, on which there is a later question, I can assure my hon. Friend that we have significant powers at present and that we shall not hesitate to use them whenever and wherever there is any evidence of anti-competitive behaviour.

Mr. Snape: Does the Minister accept that the main cause for worry about fraud in local government emanates from the Secretary of State's office—the kind of fraud which deprives authorities such as my own borough of Sandwell of resources while showering largesse on some of


the richest boroughs in the country such as Westminster and Wandsworth? Judging from his earlier reply, even the current Secretary of State is so embarrassed by the scale of fraud that he has at last—not before time—promised us a review.

Mr. Squire: The hon. Gentleman makes light of the very serious subject of fraud in local government. That is the subject of the question and I had thought, perhaps wrongly, that it was something against which the House was united. I am sorry that the hon. Gentleman cheapened the argument as he did.

Council Tax

Mr. Simon Coombs: To ask the Secretary of State for the Environment what steps he is taking to ensure that council taxpayers know the level of tax charged by each tier of local government in their area.

The Minister for Local Government and Inner Cities (Mr. John Redwood): The main way in which people will learn of the different precepts set by the different constituent local authorities is through their bills. I have a sample bill which makes very clear the amounts being charged by the county and district, respectively, any discounts which apply, and finally the amount that the individual or household is required to pay. I hope that my hon. Friend's constituents will find their bills clear. They will know who has imposed the charges and—from what they read in their local papers—who is delivering the goods.

Mr. Coombs: Is my hon. Friend aware that there is a difference of £108 between what a householder in an average band C house would pay under a Labour-controlled and under a Conservative-controlled council? Needless to say, the difference is in favour of the Conservative council. Is there a lesson that my hon. Friend would like to draw to the attention of those who will be voting in the county council elections in May?

Mr. Redwood: Indeed—they will get better value for money and better services at a realistic price from Conservative councils. My hon. Friend may like to know that Thamesdown, a Labour borough, imposes a £94 band C district charge while the adjacent Conservative authority of Salisbury charges £41—notwithstanding the fact that Salisbury receives less grant than Thamesdown.

Mr. Betts: Does the Minister accept that comparisons involving the use of band D, band C or any other band are wrong? The only comparison that should be drawn is between the average council tax for whole areas. If there are two similar authorities with the same average council tax, the authority with more lower-band properties will automatically have a higher council tax for any given band. That is the truth of the matter. Generally, it is Labour authorities that have more lower-banded—that is, cheaper—properties. Is it not time that Conservative Members stopped using fiddled figures to try to justify their own inadequacy?

Mr. Redwood: The Opposition do not understand a thing about how the system works. Labour authorities that have more lower-banded properties get a lot more grant to compensate for that. Contrary to Labour Members' allegation that the fraud is that Labour

authorities get too little grant, those authorities get much more grant to compensate. The correct comparison is between band D and band D and between band C and band C. On those comparisons, Conservative authorities win every time.

Mr. Pickles: Has my hon. Friend noted the trend in local government spending whereby the highest council tax in a shire, a district, a metropolitan district or a London borough is to be found in a Labour authority and the lowest council tax in a shire, a district, a metropolitan district or a London borough is to be found in a Conservative authority?

Mr. Redwood: My hon. Friend is quite right. There is Newcastle at £704 and Wellingborough at £218, Greenwich at £696 and Westminster at £262—in each case, the higher amount is charged by Labour and the lower amount by the Conservatives, even though more grant goes to the Labour authority and less to the Conservative one.

Mr. Straw: The Minister is not telling the whole story, as he well knows. Will he stop picking bands C and D to suit his case and accept what my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) has said—that what matters to people are the bills that come through their doors? Is he not delighted to hear that the average precept in the eight Labour shire counties is running at £6 lower than the average precept in Conservative counties, and that the latest survey by the Local Government Chronicle of all 363 tax-raising councils in England shows that the average bill per household is running at £493 under Conservative councils and at £479—£14 less—under Labour councils? Is the Minister aware, therefore, that Tory claims about the council tax are as worthless as Tory claims about value added tax and that Labour councils cost less and give a great deal more?

Mr. Redwood: The hon. Gentleman, speaking from the Opposition Front Bench, does not understand the system any more than his Back Benchers understand it. He is wrong on every count. Labour authorities get more grant and charge more, property for property, in the same bands. That is the relevant comparison. The hon. Gentleman is simply drawing attention to the fact that Labour authorities get more grant than Conservative authorities get.

Leasehold Enfranchisement

Mr. Waterson: To ask the Secretary of State for the Environment what proposals he has to publicise the leasehold enfranchisement provisions of the Housing and Urban Development Bill once it receives Royal Assent; and if he will make a statement.

Sir George Young: The leasehold enfranchisement provisions have received much publicity in the press over the past few months, most of it supportive. There will, of course, be further publicity when the provisions, which will be welcomed by many hundreds of thousands of people living in flats, come into force. We are planning to publish a booklet to help leaseholders and have offered to help fund an advisory agency for up to three years.

Mr. Waterson: Does my hon. Friend accept that the 750,000 potential beneficiaries from these provisions,


including many in Eastbourne, will welcome that announcement, as they will welcome the Government's redeeming of this important manifesto pledge in the teeth of opposition from Labour Members?

Sir George Young: My hon. Friend will be interested to know that the Bill has left this House and is in another place, where it has provoked a lively debate but where, in the capable hands of my noble Friend the Parliamentary Under-Secretary of State, the leasehold enfranchisement clauses have so far emerged unscathed.

Mr. Raynsford: Will the Minister now give his estimate of how many leaseholders will be able to take advantage of the provisions of the Bill? I ask him because in Committee he was unable to say how many had taken advantage of the provisions of the previous legislation. Is he aware of the anxieties that have been expressed about the fact that the complexities of the current Bill are such that many leaseholders who would like to enfranchise will not be able to do so?

Sir George Young: About 750,000 leaseholders will potentially benefit from the Bill. It is entirely up to the leaseholders whether they exercise the choice that the Government are making available to them, so at the end of the day it is not the view of the Government that matters but the view of the leaseholders of the flats.

Use of Resources (Lambeth)

Mr. Bowis: To ask the Secretary of State for the Environment when he last visited the borough of Lambeth to discuss the efficient use of resources.

Mr. Robin Squire: How an authority uses its resources is a matter for its members, who are accountable to their local electorate. The voters of Lambeth must be deeply concerned about the staggering allegations of maladministration in their council's performance, as revealed in the recent report of Lambeth's chief executive.

Mr. Bowis: Does my hon. Friend agree that the people of Lambeth cannot complain about lack of resources from the Government when each dwelling in Lambeth receives £500 more than each dwelling in Conservative Wandsworth next door, but that they can certainly complain about the level of corruption in the Labour council, as recognised now even by Streatham Labour party? Does he agree that they can also complain about the level of inefficiency which leads to uncollected rent, rates and community charge now totalling £140 million, which could and should be spent on better services at lower cost?

Mr. Squire: My hon. Friend makes a powerful case. As he knows, the standard spending assessment methodology is applied consistently across all local authorities in the country, and as a consequence of that methodology Lambeth receives a very high SSA, although it may not do so if Opposition Members get their way. My hon. Friend also points out that, despite that support, in the year just ended Lambeth managed to set the highest community charge of all, at £425.

Mr. Fraser: I congratulate the Minister for Housing, Planning and Construction, the hon. Member for Ealing, Acton (Sir G. Young), on coming to Lambeth this week to discuss the efficient allocation of resources and the city

challenge scheme. I hope that the example that he set of co-operation with local authorities will be followed by some of his fellow Ministers.

Mr. Squire: The best evidence for co-operation between the Government and Lambeth is that Lambeth council was one of the winners of city challenge on merit and, subject to the usual procedures, will receive some £37·5 million over the next five years for much-needed work. That is the most effective answer to the hon. Gentleman's remarks.

Mr. Dickens: Is my hon. Friend aware that in Lambeth they are still doing the Lambeth walk with £20 million worth of rent arrears and £18·2 million of rate arrears? What the hell are Lambeth councillors up to? Why should they ask the Government for more money when they do not get down to doing the job themselves?

Mr. Squire: My hon. Friend makes most eloquently the point about the failings of Lambeth council over many years. The House will be relieved that he did not go into a dance to demonstrate it.

Mr. Keith Hill: Can the Minister confirm that the London borough of Lambeth is co-operating fully with the police and the Audit Commission in all their investigations, and will he join me in welcoming the public inquiry established under Elizabeth Appleby QC? Can he confirm that the minority Labour administration's correct proposal to close down immediately the directorate most affected by the allegations was scandalously defeated by an unholy alliance of suspended and Conservative councillors?

Mr. Squire: The most important development recently in Lambeth has been a statement from the hon. Gentleman issued by the Streatham branch of the Labour party in which the hon. Gentleman, with considerable support, called for the immediate retendering of building maintenance contracts and for Lambeth council's huge finance and legal services departments to be put out to tender. I ask the hon. Gentleman, first, to persuade all the local Labour councillors to back that and, secondly, to get his own Front Bench to agree with it.

Sir Paul Beresford: Is my hon. Friend aware that the mismanagement of Lambeth council has knock-on effects which go well beyond Lambeth? In my constituency, for example, children from Lambeth who are in care are being looked after in private care homes in Croydon. The lack of speed of payments from Lambeth council is such that many of those homes are now in extreme difficulty. The payments are not coming forth from Lambeth council.

Mr. Squire: My hon. Friend makes a valid point. There are knock-on effects which go beyond the boundaries of Lambeth. It is in all our interests that Lambeth councillors organise themselves more properly in the next five years than they have in the past 10 years.

Mr. Henderson: When the Minister visited Lambeth last week, did he discuss the use of resources in the building management south east division of the Property Services Agency and the allegations of fraud and malpractice, including false payments to bogus companies, misuse of Government resources, tax fiddles and nepotism?
Does he agree that, at a time when he is calling for an independent inquiry into allegations of malpractice in


local authorities, the public interest can be served only by an independent public inquiry into his Department's agency? Does he agree that anything less than that procedure would serve only to confirm suspicions of a ministerial cover-up and double standards? Can he tell the House that the privatisation of BMSE will be suspended until an independent inquiry publishes its findings?

Mr. Squire: The House will note that attention has shifted from local government. With regard to the Property Services Agency, hon. Members have been told that a full inquiry is under way. To date, that inquiry has not discovered any evidence of fraud, although there was a small piece of undercharged work. The allegations that the hon. Gentleman has made today, and which are repeated in a national newspaper, will be taken over by that inquiry. As none of the allegations has so far been substantiated, there is no reason on earth why there should be a delay in the sale of PSA businesses. We are confident that the sale of the five businesses will not be significantly affected.

Urban Partnership Fund

Mr. Matthew Banks: To ask the Secretary of State for the Environment what recent representations he has received concerning the urban partnership fund.

Mr. Redwood: I have received several representations about the urban partnership fund. Many have welcomed the £20 million of Government cash, which the partnerships forecast will bring in another £33 million of local authority receipts and £130 million of private investment.

Mr. Banks: I thank my hon. Friend for listening to and acting on representations from my constituency in Southport, which resulted in an urban partnership fund grant of £310,000 for the redevelopment of Southport sea front. Will my hon. Friend give me an assurance today that he will find time later this year to visit Southport to ensure that the local authority spends the money as it was intended? Does he agree with me that the urban partnership fund is an outstanding success?

Mr. Redwood: Of course I agree that it is a great success. It is an example of partnership in action. It encourages local authorities to raise more money by asset sales and to use the money for the benefit of their local community. If I can fit in a visit, I should love to visit Southport. The Under-Secretary of State, my hon. Friend the Member for Hornchurch (Mr. Squire) was in my hon. Friend's constituency only yesterday. I should love to come and see the good work. I am sure that Southport sea front will benefit a great deal and will produce another £9 million of private investment for that £310,000 Government grant.

Budget

Mr. Turner: To ask the Secretary of State for the Environment what assessment he has made of the environmental impact of fiscal changes announced in the Budget.

Mr. Howard: As I understand it, the hon. Gentleman owns a part share in a racehorse, so I would imagine that he would be the first to pay tribute to my right hon. Friend

the Chancellor of the Exchequer for his Budget measures. I welcome the changes announced by my right hon. Friend the Chancellor in his Budget statement, which will greatly benefit the environment. It was the greenest Budget ever.

Mr. Turner: Instead of inflicting cruel damage by increasing fuel costs by 10 per cent. across the board, would it not have been better for the environment if the Chancellor had adjusted the differentials between leaded and unleaded petrol and introduced a higher rate of tax on cars with large engines than on small cars? I suggest to the Secretary of State that that would have been a much better contribution to our environment.

Mr. Howard: My right hon. Friend the Chancellor introduced measures on the taxation of cars which will achieve precisely the effect to which the hon. Gentleman referred. The use of unleaded petrol does not contribute to a reduction in global warming. Therefore, increasing the differential would not have the effect that the measures that my right hon. Friend introduced will have.

Mr. Gallie: Is my right hon. and learned Friend aware that yesterday Britain came under attack from our EC partners for failing to endorse an EC-wide energy tax? Will he make our critics aware that our right hon. Friend the Chancellor in his recent Budget met our commitment fully by covering energy tax in the way that he has done?

Mr. Howard: I did precisely that at a meeting of the Council of Environment Ministers in Brussels on Monday. As a result of my right hon. Friend the Chancellor's Budget, we already have in place measures that take us two thirds of the way towards achieving our target under the climate change convention that we signed up to at Rio. In the next few months, we shall announce how we propose to fulfil the other third of our target.

Mr. Chris Smith: Will the Secretary of State admit that the imposition of VAT on electricity and gas bills will, at the most generous estimate, reduce carbon emissions in Britain by less than 1 per cent? Is that not a pathetically small advance for the environment at the cost of massive hardship to millions of people who will now have to struggle hard to heat their homes? Is it not true that, as Greenpeace pointed out, the Budget was far more about raising money than about tackling climate change? Are not the Government pretending to be green purely and simply because their finances are in the red?

Mr. Howard: The hon. Gentleman will know that Friends of the Earth warmly welcomed the measures in my right hon. Friend's Budget. Has the hon. Gentleman forgotten that in February this year he told Green Magazine that his party had been thinking of a number of small but effective tax measures which included increasing VAT on environmentally unfriendly products? Does the hon. Gentleman think that he can get away with telling Green Magazine one thing and the House another?

Caravan Sites Act 1968

Mr. John Marshall: To ask the Secretary of State for the Environment what representations he has received about the Caravan Sites Act 1968.

The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry): We have received more than 900 responses to our consultation paper, "Reform of


the Caravan Sites Act 1968". A list of the respondents is in the Library, and copies of the responses are in the Department's library. We are considering the responses carefully and will announce the way forward as soon as possible.

Mr. Marshall: Does my hon. Friend agree that it is unfortunate that many of those who use gipsy sites are not gipsies, but itinerants, didicoys and ne'er-do-wells who feel that they have no obligation to society? Can we have some assurance of early legislation to repeal the Act?

Mr. Baldry: I think that there is general agreement that the Caravan Sites Act needs reform. At present, it fails gipsies and local communities. We want to ensure that the gipsies can have proper provision for sites through the planning system and that local communities are freed of the problems of illegal camping whether by gipsies or by new age travellers.

Mr. Pike: Does the Minister accept that some of the proposals in the consultation document last August that official sites should be abolished and sold off in the way suggested by some hon. Members would create more problems than it would solve? Will he undertake to consider in a positive way whether one solution that would be more acceptable to local authorities and residents, while overcoming some of the problems caused by unofficial sites, would be to consider the provision of smaller sites rather than large official sites?

Mr. Baldry: With respect, I do not think that the hon. Gentleman has fully read the consultation paper. We are keen to ensure that local authority sites are properly managed. Many local authorities are not managing their sites. If gipsies are allowed to make provision for their sites through the planning system, I have no doubt that the consequence will be smaller sites.

Mr. Bellingham: Is the Minister aware that his proposals have widespread support, especially those which aim to stamp out the plague of illegal occupation? Is he aware that my local borough council, King's Lynn and West Norfolk, is aware that the proposals might lead to the withdrawal of 100 per cent. funding of local authority sites? Will he look again at the proposals and seek a compromise whereby there is still some Department of the Environment funding for those sites?

Mr. Baldry: There is no other parallel anywhere in the machinery of government for 100 per cent. direct grant as there is for caravan sites. There is no longer any justification for that. We have no objection to those who wish to pursue a nomadic form of life, but they should not do so at a cost to the general taxpayer and should increasingly make their own provision.

Tenants Charter

Dr. Wright: To ask the Secretary of State for the Environment if he will make a statement on progress on the tenants charter.

Mr. Baldry: There is continuing interest in the charter, mainly from tenants. More than 200,000 tenants, have already applied directly to my Department for copies of the full charter.

Dr. Wright: Is the Minister aware that tenants used to have a charter right to decide who should manage their estates? Will he confirm that that right of veto by tenants is being removed by the Government's Housing and Urban Development Bill? Does that not demonstrate the hypocrisy of a Government who pretend to be the tenant's friend, but when it comes to the choice between the rights of tenants and the Government's mania for privatisation they put dogma first and tenants last?

Mr. Baldry: If the hon. Member were to look at the Bill and its provisions, he would see that tenants have far more rights to be consulted under the Bill than they have at present and will be much more involved in the tendering process than they are at the moment. The truth is that this Government and the Conservative party have introduced the right to repair, the right to improvement, the right to manage, the right to buy and the right to be consulted. We are determined that tenants should have proper rights and effective remedies. Labour Members are concerned about that because they know that all too often Labour councils are incapable of delivering effective housing management.

Mr. Dunn: Will the Minister confirm whether, under the tenants charter, it will be possible for tenants who pay their rent regularly and on time to force incompetent councils such as Lambeth and Southwark to take action against tenants who do not?

Mr. Baldry: We are determined that standards of housing management should be driven up. Too many local authorities are lax in doing repairs and lax in collecting rents—and all too often they are Labour-controlled authorities. I invite any Opposition Member who doubts that to spend half an hour with me and walk across Westminster bridge to the China Walk estate in Lambeth, where I can introduce him to large numbers of people who have been waiting for basic repairs for some considerable time.

Mr. Alf Morris: How satisfied is the Minister with his Department's record in improving housing conditions for disabled people seeking more suitable premises?

Mr. Baldry: We have a very good record on renovation grants and on grants for disabled facilities. They have increased substantially in recent years and we will see that they continue to do so.

Rivers and Beaches

Mr. David Nicholson: To ask the Secretary of State for the Environment if he will make a statement on the trend of investment in (a) water supply and (b) environmental measures to cleanse rivers and beaches since the Water Act 1989.

Mr. Maclean: Since privatisation, investment in water supply and the cleansing of rivers and beaches has increased dramatically. The £30,000 million investment programme in new pipework in water supply and sewerage treatment works is cleaning up our rivers, beaches and seas. It is good for the environment, good for consumers, good for the construction industry and good for jobs.

Mr. Nicholson: Those of our constituents all over the country who are paying greatly increased water charges will need to know of the value for money in the increased investment in the water and sewerage industry.


Incidentally, they will also be concerned about the burden on single-person households and share the general pressure for water metering. Is my hon. Friend aware that the consumers of South West Water, who include people in the western end of my constituency, are very resentful indeed about its high charges and the rapid increase in those charges and that their view is strongly held by my hon. Friends the Members for the area? They feel that the whole country should be responsible for the clean-up of the beaches in the south-west, which are a national asset.

Mr. Maclean: Of course I am aware of the concern of my hon. Friends in the south-west about the increase in their water charges, due to implementing various measures designed to clean up the large number of beaches in the south-west. I think that my hon. Friends will agree that if we are to continue to have a fine tourist industry in the south-west of England we need the highest possible environmental quality. We are embarked, and the water industry is embarked, on a programme there, but I also take careful note of, and am very sympathetic to, the point that in the longer term any other measures that we sign up to must have quantifiable, value-for-money results. We are keen to sign up to measures that protect the environment, but we must show that they give value for money.

Ms Short: Does the Minister agree that his attitude in boasting of the investment that is taking place is far too complacent? His duty and that of the Government is to ensure that people have safe water to drink, that our rivers are clean and that our beaches do not make children ill. We do not have the best. In 1992, the European Court of Justice found Britain guilty of failing to comply with the drinking water directive. That means that over a million people have been drinking water that damages their health, river standards have declined and many of our beaches cause ill health in children who play there. The Government must encourage more investment and less profit for the privatised water companies.

Mr. Maclean: Sometimes I am amazed at the Labour party's attempts to try to grapple with the concept of the market and delivering goods and services to people. The hon. Lady accuses us of complacency and boasting of a £30,000 million investment programme. Of course we are boasting about it—it is the biggest investment programme in this country's entire history; because of it, the quality of water in our rivers and in our seas gets better every year and we are on target to meet our investment programmes and all our water quality directives.

East Thames Corridor

Mr. Tony Banks: On a point of order, Madam Speaker. I wonder whether you could assist a frustrated and perplexed Member. During Question Time, the Secretary of State referred lightly to the east Thames corridor, and we moved quickly on. Today, he made an important announcement about the corridor which, according to his policy document, will help to shape the region's environment and guide its development for the remainder of this century and the early years of the next.
One understands that the east Thames corridor initiative and the consultation process are important to the whole country, so it would seem to be an appropriate subject for a ministerial statement at the Dispatch Box. Ministers make some fairly insignificant and unimportant statements when they choose, but we have had no statement on a matter that everyone agrees is of great importance.
Yesterday, you, Madam Speaker, said, as reported in column 824 of Hansard, that you would consider the matter and would in due course make your views known. I wonder whether you are in a position to give us the benefit of your thoughts on the matter.

Mr. Jack Straw: Further to that point of order, Madam Speaker. May I reinforce my hon. Friend's point? The report on the east Thames corridor is of immense significance to more than 1 million people who live in the area and to at least 100 Members on both sides of the House. In view of that, I wonder whether you would accept that it is precisely the sort of issue on which Ministers should make their views known to the House before they make them known to the press.

Madam Speaker: I am sure that I shall be able to help the House. As the issue was raised in the Chamber last night, as the hon. Member for Newham, North-West (Mr. Banks) said, I have had an opportunity to look into the sequence of events relating to it.
A written question from the hon. Member for Erith and Crayford (Mr. Evennett) was answered yesterday evening, and the answer was placed in the Library in a perfectly regular way. By means of that answer the House was informed that the Government's consultation proposals for the east Thames corridor would be available in the Vote Office at 10 o'clock today, and they duly arrived. At

the same time, the House was informed that general publication of the proposals would take place simultaneously.
As the House knows, occupants of the Chair have frequently stated that it is a discourtesy to the House for Governments to make available substantial information for publication in the press before it is available to hon. Members. On this occasion that is distinctly not the case. On the contrary, the written answer drew the attention of the House to the fact that information would be available in the Vote Office at the same time as it was released for publication. Whether the launch of that consultation exercise justified an oral statement to the House is entirely a matter for the Government's judgment and is not one on which the Speaker is, or will ever become, involved. I am satisfied that there has been no breach of order or discourtesy to the House—and I now intend to move on.

Mr. John Denham: rose—

Madam Speaker: Does the hon. Gentleman wish to raise a different point of order?

Mr. Denham: Yes, Madam Speaker.

Madam Speaker: In that case, I must hear it.

Mr. Denham: It is a rather similar matter.

Madam Speaker: Order. I have dealt with this subject, and I shall not take points of order on similar matters. If it is on a different subject, I shall, of course, take the hon. Gentleman's point of order.

Mr. Denham: This morning, the Secretary of State for the Environment issued a press release concerning the Hampshire county structure plan, which is an important strategic issue. So far as I have been able to establish, no attempt was made to alert me, as a Hampshire Member of Parliament, to the intention to issue the press release. At Question Time, the hon. Member for Winchester (Mr. Malone) made it clear that he had been made aware of the press release. Would not it be courteous for the Secretary of State to inform all Hampshire Members, and not just his hon. Friends, of such important strategic announcements?

Madam Speaker: This is a matter for the Secretary of State, but I should point out that I did call the hon. Gentleman, and was delighted to do so. I hope that, with regard to this matter, I have been as helpful as possible.

Registration of Domiciliary Care Agencies

Mr. David Hinchliffe: I beg to move,
That leave be given to bring in a Bill to make provisions for the registration of domiciliary care agencies; to make provisions consequential thereon; and for connected purposes.
This Bill aims to clear up an anomaly in registration and inspection procedures relating to the provision of care services. The anomaly concerns the fact that, while a person in receipt of care in a residential or nursing home has the protection of the Registered Homes Act 1984, a person in receipt of the same form of care in his own home has no similar statutory protection. The Registered Homes Act requires the registration of all establishments providing care and a named person deemed to be suitably qualified who is responsible in law for the operation of the establishment. It enables homes to be inspected by local registration and inspection units. It makes provision for the cancellation of registration and for the protection and care of residents in residential or nursing homes.
My proposed Bill would apply the principles of the Registered Homes Act to domiciliary care, requiring all agencies in the private, voluntary and public sectors to be registered and inspected by the same local registration and inspection units. The same fit-person requirement would be applied, whoever was responsible for the operation of the agency.
When the National Health Service and Community Care Act 1990 was passing through the House, and consideration was being given to the development of domiciliary care, this inconsistency in the law was the subject of amendments supported by hon. Members on both sides. The amendments were resisted by the then Minister of State, now the Secretary of State for Health, on behalf of the Government, on the basis that the contracting and purchasing arrangements included in the legislation offered sufficient safeguards.
Many hon. Members will be aware that, after the House debated this issue, the need for legislation to protect vulnerable people who are cared for in their own homes became even more apparent when a 66-year-old woman in a wheelchair was viciously murdered in her home by her female carer. Subsequent police inquiries revealed that the woman convicted of the murder had supplied false written references to the agency that had arranged for her to care for the disabled woman. To the agency's great credit, it has been at the forefront of subsequent campaigning for the introduction of statutory registration and inspection requirements for domiciliary care.
It is quite apparent that the Government's reliance on contracting and purchasing arrangements does not in any way offer protection to vast numbers of elderly disabled and vulnerable people and will not avoid a repetition of such incidents. The Government's central assumption is of a local authority contracting with agencies for the provision of services. However, it is the case now, and will be the case after 1 April, that many people purchase these services privately without any form of local authority involvement. Such people therefore receive no protection whatsoever from the contracting arrangements, and the Government must be aware that the more stringent charging policies forced on local authorities are encouraging this process even further.
Many directors of social services have written to me supporting my proposed Bill, and several have pointed out that contractual arrangements are a very poor way of ensuring quality services at an individual level. One director said in his letter:
Experience in the residential sector shows that placing authorities are often the very last to realise that abuses are going on involving their clients
The extent of concern about the anomaly has led, in a number of areas, to the establishment of voluntary registration schemes. Many of those schemes are applying standards for registration for domiciliary care drawn up by the Joint Advisory Group of Domiciliary Care Associations. However, while such schemes are an important step forward, many of those organising them point to their weaknesses. Obviously, only the better agencies will volunteer to participate and those operating low standards are likely to be missed.
There is also no means of enforcement under such voluntary arrangements. As several directors of social services have said to me, voluntary schemes are a poor substitute for statutory regulations that would make the position of the service user, provider and local authority much clearer. In implementing the community care changes with effect from 1 April, the Government have included the requirement that 85 per cent. of the Department of Social Security funding that is passed to local authorities after next Thursday should be spent in what they call the independent sector. The Government anticipate that that will lead to more domiciliary provision by the voluntary and private agencies that are currently unregulated.
Many agencies have argued that the individual residing in his or her own home has the same right of protection under the law as those residing in a care or nursing home. In many ways, individuals are more at risk in the privacy of their own home. They are often housebound and frequently receive a declining number of visitors. Inevitably, the care staff helping them are supervised to a much lesser degree than they would be in a residential establishment.
On 30 November last year I asked the Department of Employment for its estimate of the number of independent sector domiciliary care agencies. The Parliamentary Under-Secretary of State for Employment replied that at that time there were 1,388 licensed employment agencies that had said that their field of activity might include domiciliary care. In addition to those agencies, an increasing number of private care and nursing homes also offer domiciliary services without specific registration and inspection. A sizeable number of agencies is already involved in such care and there is every reason to believe that the number will continue to increase.
My Bill is supported by the United Kingdom Home Care Association, which represents more than 300 voluntary and private agencies, the Joint Advisory Group of Domiciliary Care Associations, the British Association of Domiciliary Care Officers, the National Association of Inspection and Registration Officers, the British Association of Social Workers, and the Social Care Association. It is also supported by the Association of Directors of Social Services, Age Concern and many other interested organisations.
I understand that the social services inspectorate has drawn Ministers' attention to the need for such a measure.


I would not be at all offended if the Government took the Bill off my hands and implemented it themselves. I am happy to commend it to the House.

Question put:—

The House divided: Ayes 188, Noes 1.

Division No. 200]
[3.43 pm


AYES


Abbott, Ms Diane
Dunwoody, Mrs Gwyneth


Adams, Mrs Irene
Eagle, Ms Angela


Ainger, Nick
Eastham, Ken


Allason, Rupert (Torbay)
Enright, Derek


Allen, Graham
Evans, John (St Helens N)


Anderson, Donald (Swansea E)
Ewing, Mrs Margaret


Anderson, Ms Janet (Ros'dale)
Fatchett, Derek


Armstrong, Hilary
Fisher, Mark


Ashton, Joe
Flynn, Paul


Banks, Tony (Newham NW)
Foster, Rt Hon Derek


Barnes, Harry
Foster, Don (Bath)


Barron, Kevin
Foulkes, George


Battle, John
Fraser, John


Beckett, Rt Hon Margaret
Fyfe, Maria


Benn, Rt Hon Tony
Garrett, John


Berry, Dr. Roger
Gerrard, Neil


Betts, Clive
Godman, Dr Norman A.


Boyce, Jimmy
Godsiff, Roger


Boyes, Roland
Golding, Mrs Llin


Bruce, Malcolm (Gordon)
Gordon, Mildred


Burden, Richard
Grant, Bernie (Tottenham)


Byers, Stephen
Griffiths, Nigel (Edinburgh S)


Callaghan, Jim
Griffiths, Win (Bridgend)


Campbell-Savours, D. N.
Grocott, Bruce


Canavan, Dennis
Gunnell, John


Cann, Jamie
Hain, Peter


Carlile, Alexander (Montgomry)
Hanson, David


Chisholm, Malcolm
Harris, David


Clapham, Michael
Heppell, John


Clark, Dr David (South Shields)
Hill, Keith (Streatham)


Clarke, Eric (Midlothian)
Hinchliffe, David


Clarke, Tom (Monklands W)
Home Robertson, John


Clelland, David
Hood, Jimmy


Clwyd, Mrs Ann
Hoon, Geoffrey


Cohen, Harry
Howarth, George (Knowsley N)


Cook, Frank (Stockton N)
Hughes, Robert (Aberdeen N)


Corbett, Robin
Hughes, Roy (Newport E)


Cousins, Jim
Illsley, Eric


Cryer, Bob
Jackson, Glenda (H'stead)


Cummings, John
Jackson, Helen (Shef'ld, H)


Cunliffe, Lawrence
Janner, Greville


Cunningham, Jim (Covy SE)
Johnston, Sir Russell


Dafis, Cynog
Jones, Barry (Alyn and D'side)


Darling, Alistair
Jones, Jon Owen (Cardiff C)


Davidson, Ian
Jones, Lynne (B'ham S O)


Davies, Rt Hon Denzil (Llanelli)
Jones, Martyn (Clwyd, SW)


Davies, Ron (Caerphilly)
Kaufman, Rt Hon Gerald


Davis, Terry (B'ham, H'dge H'l)
Kennedy, Jane (Lpool Brdgn)


Denham, John
Kilfoyle, Peter


Dixon, Don
Kinnock, Rt Hon Neil (Islwyn)


Dobson, Frank
Leighton, Ron


Donohoe, Brian H.
Loyden, Eddie


Dowd, Jim
Lynne, Ms Liz





McCartney, Ian
Raynsford, Nick


McCrea, Rev William
Reid, Dr John


Macdonald, Calum
Robertson, George (Hamilton)


McKelvey, William
Robinson, Peter (Belfast E)


McMaster, Gordon
Roche, Mrs. Barbara


McNamara, Kevin
Rooney, Terry


Mahon, Alice
Ross, Ernie (Dundee W)


Mandelson, Peter
Rowlands, Ted


Marek, Dr John
Salmond, Alex


Marshall, David (Shettleston)
Sheerman, Barry


Marshall, Jim (Leicester, S)
Sheldon, Rt Hon Robert


Martin, Michael J. (Springburn)
Short, Clare


Martlew, Eric
Simpson, Alan


Meacher, Michael
Skinner, Dennis


Meale, Alan
Smith, Andrew (Oxford E)


Michael, Alun
Smith, C. (Isl'ton S & F'sbury)


Michie, Bill (Sheffield Heeley)
Smith, Rt Hon John (M'kl'ds E)


Milburn, Alan
Snape, Peter


Miller, Andrew
Spearing, Nigel


Morgan, Rhodri
Spink, Dr Robert


Morley, Elliot
Steel, Rt Hon Sir David


Morris, Rt Hon A. (Wy'nshawe)
Steinberg, Gerry


Morris, Rt Hon J. (Aberavon)
Stott, Roger


Mudie, George
Strang, Dr. Gavin


Mullin, Chris
Straw, Jack


Murphy, Paul
Taylor, Mrs Ann (Dewsbury)


Oakes, Rt Hon Gordon
Trimble, David


O'Brien, Michael (N W'kshire)
Turner, Dennis


O'Brien, William (Normanton)
Vaz, Keith


O'Hara, Edward
Wardell, Gareth (Gower)


Olner, William
Wareing, Robert N


Orme, Rt Hon Stanley
Wicks, Malcolm


Pickthall, Colin
Wigley, Dafydd


Pike, Peter L.
Williams, Alan W (Carmarthen)


Pope, Greg
Winnick, David


Powell, Ray (Ogmore)
Wray, Jimmy


Prentice, Ms Bridget (Lew'm E)
Wright, Dr Tony


Prentice, Gordon (Pendle)



Prescott, John
Tellers for the Ayes:


Purchase, Ken
Mr. Keith Bradley and


Quin, Ms Joyce
Mr. Kevin Hughes.


NOES


Dover, Den
Tellers for the Noes:



Mr. Andrew F. Bennett and



Mr. Bill Etherington.

Question accordingly agreed to.

Bill ordered to be brought in by Mr. David Hinchliffe, Ms Tessa Jowell, Mr. Malcolm Wicks, Mr. Andrew Rowe, Mr. Roger Sims, Ms Liz Lynne, Rev. Martin Smyth, Ms Dawn Primarolo, Ms Clare Short, and Mr. Ian McCartney.

REGISTRATION OF DOMICILIARY CARE AGENCIES

Mr. David Hinchliffe accordingly presented a Bill to make provisions for the registration of domiciliary care agencies; to make provisions consequential thereon; and for connected purposes; And the same was read the First time; and ordered to be read a Second time upon Friday 2 July, and to be printed. [Bill 172.]

Orders of the Day — European Communities (Amendment) Bill

Considered in Committee [Progress, 11 March]

[MR. MICHAEL MORRIS in the Chair]

Clause 1

TREATY ON EUROPEAN UNION

Amendment proposed [11 March]: No. 32, in page 1, line 9, after 'II', insert
'(except Article 171 on page 46 of Cm 1934 relating to the European Court of Justice.)'.—[Mr. John Morris.]

Question again proposed, That the amendment be made.

The Chairman of Ways and Means (Mr. Michael Morris): I remind the Committee that we are also considering the following amendments: No. 228, in page 1, line 9, after 'II', insert 'except Article 172'.
No. 329, in page 1, line 9, after 'II', insert
'(except Article 168a on page 46 of Cm 1934)'.
No. 330, in page 1, line 9, after 'II', insert
'(except Article 171 on page 46 of Cm 1934)'.
No. 331, in page 1, line 9, after 'II', insert
'(except Article 172 on page 46 of Cm 1934)'.
No. 411, in page 1, line 9, after 'III', insert
'(except Articles 32, 32(d) and 33 on pages 64 and 65 of Cm 1934).'.
No. 416, in page 1, line 9, after 'IV', insert
'(except Articles 137, 140a, 143 and 146 on pages 73 and 74 of Cm 1934).'.
No. 152, in page 1, line 10, after '1992', insert
'but not Article 143 in Title IV thereof.

Mr. Nigel Spearing: On a point of order, Mr. Morris. I apologise for not giving you notice of this point of order. Will you enlighten the Committee and me about the content of amendment No. 456, which relates to the function of the European Court of Justice? We are now discussing the group of amendments in relation to article K.3(2)(c) and its application to articles L to S of the treaty.
I appreciate that article K and articles L to S are part of the alleged intergovernmental section of the treaty, which may not have direct and immediate legislative effect, but I think that you will agree that in article K.3(2)(c)—consequential on a convention which could be before the House at a future date—the jurisdiction of the European Court of Justice does apply. As the amendment has not been selected, will it be possible to refer to this aspect of the European Court of Justice in the debate, or would it be more appropriate to table the amendment again, in another form, at a later stage of the Bill?

The Chairman: If the hon. Gentleman catches my eye, I am sure that he is ingenious enough to incorporate the matter in this debate.

Mr. Geoffrey Hoon: There has been a good deal of discussion lately about the Government's timetable for the progress of the Bill. They are clearly speeding up because on a previous occasion it took me three weeks to move from the beginning of one speech to the conclusion of another. This speech has taken a mere 13 days from when I began it to when I hope to finish.
On that occasion, 13 days ago, I invited the Attorney-General to explain how he sees the jurisdiction of the European Court of Justice in the light of Britain's opt-out on the protocol on social policy. If other member states go ahead and legislate under the protocol—as legally they are entitled to do—what effect will that have on the case law and precedents of the European Court of Justice? Will it mean that there are two separate legal systems of case law in the European Community for the European Court of Justice: one for the 12 member states that will include the United Kingdom, and another—concerned particularly with social policy—for the other 11 member states that will have passed directives and established cases under that process?
Ultimately, that is a matter for the European Court of Justice, but there is a matter which affects courts in the United Kingdom because, under the European Communities Act 1972, they are bound by decisions of the European Court of Justice. Which series of precedents would the United Kingdom courts be bound by?

Mr. David Winnick: My hon. Friend prefaced his remarks with a reference to the last time that he spoke. Although we may have different views about the Bill, does he agree that it is important that there should he careful deliberation in Committee of the amendment, any future amendments and new clauses? Is my hon. Friend aware that some people believe that the Government are determined to push the debate through the night—either through the entire night, thereby possibly destroying the next day's business, or very late—and that it all depends on support from the Liberals and the nationalists?

The Chairman: Order. That has absolutely nothing to do with the amendment.

4 pm

Mr. Hoon: I was referring to United Kingdom courts. If they are bound to follow the decisions of the European Court of Justice, how will they know which series of precedents to follow? Will they follow decisions taken under social protocol directives, where cases have been decided by the European Court of Justice or the other 11 member states, or will they follow the series of cases established by the Twelve? That is a point for the jurisdiction of the European Court of Justice and, as a consequence, for United Kingdom courts. If the Attorney-General intends to sum up, I should be grateful if he would give some thought to the matter so that we can consider it afresh.

The Minister of State, Foreign and Commonwealth Office (Mr. Tristan Garel-Jones): I may be able to help the hon. Gentleman at this stage of the Committee's deliberations. He will agree that the protocol is quite clear that Acts adopted by the Council under it shall not be applicable to the United Kingdom. It therefore follows that any judgment that the European Court of Justice may give on such an Act would not be applicable to the United Kingdom. Any measure under the social protocol will not be Community law as such because its basis will be not the Community treaties but the agreement of 11 which flows from the protocol itself.

Mr. Hoon: I am grateful to the Minister for that reply, but I am not sure that it entirely deals with the problem. I was referring to the situation that arises when cases go all


the way to the European Court of Justice. They are not minor cases but, as the Minister will agree, are usually landmark decisions where the court is not merely considering the intention of a particular directive. The protocol allows European Community institutions to be used to interpret case law in that way and, presumably, therefore allows the European Court of Justice to be involved. In those circumstances, when the court gives a decision, it is not merely giving a decision on one directive made under the protocol but will be reviewing the relevant cases in that domain.
Many of those cases will have been decided by the court when the United Kingdom was participating fully in the process of European Community law. Under the protocol, with the United Kingdom on one side—as the Minister said, that is the strict wording of the protocol—when the court has made a decision, it will have to be decided whether the United Kingdom courts and the European Court of Justice itself will follow it. I accept the strict wording of the protocol—the Minister was absolutely right to that extent—but I am more concerned about what the effect will be in terms of precedent.
It would be useful if the Attorney-General would comment. It would be curious if there were one set of cases which bound only 11 member states, because they had to do with a directive passed under the protocol on social policy, and another set of cases which included the United Kingdom. That is a point of legal confusion with which the Government must deal.

Mr. Calum Macdonald: Although the Minister is correct about the wording of the protocol, surely the protocol itself is part of the treaty of Rome in that it is annexed to the treaty of Maastricht. Any proposal annexed to a treaty that becomes part of the treaty of Rome itself becomes an integral part of the treaty of Rome. The Minister cannot say that it is simply intergovernmental because it is part of the treaty of Rome.

Mr. Hoon: That is right, although the Minister clearly wishes to comment.

Mr. Garel-Jones: I think that the Committee will recognise that something else flows from the protocol—the agreement among the 11. That is an intergovernmental agreement. That is where any decisions that the 11 may choose to make would be taken, and it is outside the treaty.

Sir Teddy Taylor: Does the hon. Gentleman agree that, far from having resolved the problem, the Minister of State may have created a new problem? In the event of a decision to eliminate the protocol from British law, but not from the treaty, so that it is not a Community obligation for the agreement of the 11, would it not be wholly illegal for the Government to seek to make payments of one twelfth of the cost of the protocol? Then we would be in a terrible mess, which only our courts could resolve. That would take a long time.
Has the Minister of State not raised an issue about which we should all think carefully? If the protocol is removed from British law, there should be no obligation to make payments for a Community obligation, for the simple reason that, as the Minister of State said, there is no Community obligation but an obligation of the agreement of the 11.

Mr. Hoon: I am grateful for that observation. I suspect that the proper answer is that, when we have an opportunity, as we hope we shall, for a further debate on the implications of the social protocol, it may be possible to deal with that point.

Sir Teddy Taylor: It is over: it has already happened.

Mr. Hoon: Perhaps I may return—

Mr. John Morris: A most important point has been raised in all seriousness. Perhaps the Minister, or the Attorney-General, would clarify the matter. Would such payments be ultra vires?

Mr. Hoon: rose—

Sir Teddy Taylor: Answer.

Mr. Hoon: Again, that is not a matter for me, but perhaps the Minister would like to try to answer.

Mr. Garel-Jones: I shall try to assist the Committee. I do not know whether the right hon. and learned Member for Aberavon (Mr. Morris) was in the Chamber at the time, but the important question raised by my hon. Friend the Member for Southend, East (Sir T. Taylor) was dealt with on a previous occasion by my right hon. and learned Friend the Attorney-General.

Mr. Hoon: Perhaps I may leave that point now, and make some progress on what I was saying about institutional arrangements for the European Court of Justice.

Mr. Tony Marlow: The hon. Member for Ashfield (Mr. Hoon) brings a great deal of skill and experience to our debates, and I am always interested in what he has to say, but is not the debate somewhat academic? I have just come back from Brussels, having visited the Commission, the European Parliament and other institutions, and I detected a gung-ho feeling there. People are concerned about ratification, but if and when the treaty is ratified they intend to go at full speed ahead—on the social chapter, among other things. They will say, "We want everybody to do it; we do not want those burdens to fall only on us. We want everybody to share in the glories, or the burdens, of the social chapter." The social protocol excludes the United Kingdom, so they will look for other ways to include us, via other routes through the treaty. Do not articles 2 and 3 of the treaty suggest that the European Court will be sympathetic to that approach, and that the protocol itself is therefore not a matter of great relevance? People will get what they want through other means, and the court will help them.

Mr. Hoon: That is certainly a possibility, and I shall develop that argument briefly later. Yes, the other 11 member states would like the United Kingdom to be fully part of that process—and the institutional difficulties that I have touched upon concerning the European Court of Justice arise equally in relation to the European Parliament, where there are moves to exclude British Members from participating in debates on social protocol questions. Clearly, that will create the institutional confusion across the Community about which I am now complaining in the context of the European Court of Justice.

Mr. Nicholas Budgen: If there is a strong political element in the European Court


of Justice, does not the hon. Gentleman consider it likely that the Commission will make suggestions to the court so that legal rights may be created to force the social chapter upon the United Kingdom by the back door? May not pressure also be brought to bear on the United Kingdom to conform more readily to the convergence criteria and the various other mechanisms that may ultimately lead to a single currency?

Mr. Hoon: I am tempted to agree with the hon. Gentleman's conclusion, although I do not accept his premise, which was to suggest that the European Court of Justice is not independent of political pressures. I do not believe that the court would be likely to respond to an invitation from the Commission in the way that the hon. Gentleman suggests.

Mr. Garel-Jones: I hope that I can assist the Committee. I think that I agree with the point that the hon. Gentleman is making. It is a mistake to assume that the European Court of Justice is bent upon bringing forward political judgments that are favourable to the centralising process.
As was made clear in an earlier debate, it is my contention, and that of the Government, that the position is changing. Only yesterday, the European Court of Justice issued a significant opinion on external competence. The Commission had argued that it had exclusive competence to negotiate in International Labour Organisation conventions. The court was of the opinion that that was a matter of mixed competence, in which member states have an important part to play. That illustrates the changed mood that the Maastricht treaty has brought about, not just in the court but throughout the Community.

Mr. Hoon: I am grateful to the Minister.
I was about to say that there was an inevitable tendency, however one interprets the political approach of the European Court of Justice, for it to become involved in institutional questions. In effect, it sits as a sort of supreme court for the European Community, and therefore from time to time has to resolve such delicate institutional issues. I intended to mention the external relations case and cases concerned with the legal basis of directives. Those matters might previously have been resolved between Governments at the political level. The European Court of Justice inevitably finds itself caught up in political, institutional and constitutional debates.
The court set out how it views its own responsibility. It described the European Community as
a community based on the rule of law
with
a complete system of legal remedies and procedures designed to commit the Court of Justice to review the legality of measures adopted by the institutions.
Clearly, the court sees itself as being at the centre of that institutional debate.

Mr. Winnick: I think that we agree that the role of the European Court of Justice is along the lines that my hon. Friend has suggested. That being so, if the Maastricht treaty is ratified, will not a time come—perhaps not too long afterwards—when the European Court of Justice may be asked to decide on cases brought by employees in the United Kingdom, who will argue that, if other countries have the social chapter, there is no reason why people in this country should not benefit from it? I shall not go into the rights and wrongs of the matter now; they

will be decided later, and it will not be for us to decide them. We should not, therefore, reach the conclusion that the Government believe obvious, which is that, if the treaty goes ahead, the social chapter will not apply in Britain, because the European Court of Justice may decide otherwise.

Mr. Hoon: That is a possibility, and that will turn upon the way in which the court views the effectiveness of the opt-out on social policy.
An interesting case that is relevant to the whole question of the institutional responsibilities of the court was the ruling of the court on the EC-EFTA agreement. In looking at the structure proposed by the Commission and agreed by the Council of Ministers for the European economic area, the European Court of Justice took a quite different legal view from the political conclusions reached by the Commission and the Council. It said that the new treaty was clearly incompatible with the existing Community legal structure and was therefore unconstitutional.
The court was mainly concerned at that stage about the creation of a proposed EFTA court because it saw a potential rivalry between its competence and jurisdiction within the Community and the competence and jurisdiction of the proposed court to supervise the structure of the economic area.
What the court was concerned to do—this is significant—was to maintain a single and coherent jurisdiction. That was part of its reason for rejecting the approach agreed by the Commission and the Counci. If that is the case in terms of coherence, does it not follow from what I have been saying that the court might similarly be concerned about the lack of coherence created by the United Kingdom's opt-out on the social chapter? It seems to create some of the same difficulties from the point of view of a single structure for the European Community in the context of its legal system.
There are two potentially conflicting systems in operation, and while I accept the accuracy of the Minister's quotation from the social protocol, he could equally have quoted, in relation to the EC-EFTA agreement case, the decision that he and his colleagues in the Council of Ministers reached. The Court of Justice rejected that political conclusion and said that it was inconsistent with the structure that had been established.
An area in which the Maastricht treaty makes significant improvements is the ability of the European Parliament to bring proceedings before the court. That Parliament has faced difficulties in the past in asserting its institutional rights before the European Court of Justice. Although its vital institutional interests have been affected by certain court decisions, it has not always had the right to argue its case before the court.
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The Maastricht treaty significantly improves the position for the Parliament in that article 173 allows it to bring a legal challenge before the court
for the purpose of protecting its prerogatives.
The importance of that lies in the fact that it permits a democratically elected institution to assert its institutional rights against other European Community institutions. Similarly, article 175, as revised by the treaty, improves the position of the Parliament by allowing it greater scope to bring actions before the court.
Those changes are to be welcomed and I hope that hon. Members, whatever their views about the general institutional arrangements, will support a situation which gives a democratically elected institution the right to participate in court cases on an equal basis with the European Commission and the Council.

Mr. Iain Duncan-Smith: It is always a pleasure to speak following the hon. Member for Ashfield (Mr. Hoon). We have discussed at length many issues about the European Court of Justice, on many of which we hold similar opinions.
I am concerned with amendments 329, 411, 416, 32 and 330, which relate to probably the most misunderstood part of the Community. When we started to discuss this group of amendments, the right hon. and learned Member for Aberavon (Mr. Morris) invited the Minister to comment on the philosophy of the European Court, and asked whether it was an interpretative and innovative court leading to centralisation. Those questions must be answered, and the Minister has not fully answered them. I shall demonstrate that the European Court of Justice is an innovative court, has drawn to itself greater powers, has enhanced the powers of the other Community institutions and, in so doing, has hastened what I believe is a movement towards centralisation.
When the Community's originators first set up the Court of Justice, their model was clearly the Conseil d'Etat of France. The choice of the Conseil d'Etat was no accident. Indeed, it was a significant act because it set the type and style of legal process for the Community. The importance of that role model needs explaining because the Conseil d'Etat has two distinct roles. It is both legal adviser to the Government and the supreme administrative law court, with competence to rule on any legal matter linked to, or arising from, administrative acts.
The consultation process of the Conseil d'Etat is compulsory in respect of Government measures and ordinances, and its opinions influence legislation. Its statements are never made public unless the Government so desire—we already begin to see some features of the court weaving their way through what is happening—so that the Conseil d'Etat has the ability to shape the direction of new legislation. Further, its anual report focuses on legislative reforms which it deems necessary and in the public interest. So there is a clear relationship between the Executive and that organisation. That is not surprising, because I note that, every year, the vice-president of the Conseil d'Etat presents the President of the Republic with new year's greetings on behalf of the civil service.
The role model for the European Court is a primary part of France's administration. I make those points clearly in discussing the power of the court to clarify how the court views its relationship with Community institutions and Community law, which is now being amended by the treaty of European union.
The originators of the European Economic Community ensured that the central ethos of the court would be more political than is the case in our common law law courts. That is reflected in appointments to the court. The treaties require that judges and advocates general should be chosen from
persons whose independence is beyond doubt and who possess the qualifications required for appointment to the highest judicial offices in their respective countries or who are jurisconsults of recognised competence".

It is significant that the independence of candidates is the paramount consideration, while professional qualifications and judicial experience are secondary. It is telling that, in the court of first instance, to which amendments Nos. 329, 411 and 416 apply, the criteria for judges' appointments is less rigorous even than that for the justices of the court.
There are great examples of judges not possessing any formal legal qualifications. Intriguingly, only a minority of appointees have had any judicial experience in their own countries. The majority come from different careers while holding merely formal legal qualifications. It is important to note that several judges have held ministerial posts in their own countries and that several others have been senior civil servants. Only three of the present judges have had judicial experience—[Interruption.] The present representative from the United Kingdom is not one of them.
Clearly, that range of previous experience goes well beyond purely legal qualifications and encourages the view that judges should rule on economic, social, administrative, fiscal and—of course, more and more—political issues within Community law. That the court has a clear conception of its role is evident when one looks at statements made by the courts advocates general.
The other evening, my right hon. Friend the Minister of State played down the role of the advocates general in the European Court. We are mistaken in doing that, because the advocates general are fully recognised as the court's external voice, and their opinions have proved an important element in the court's development. Seldom has the court disagreed with the advocates' opinion. As one authority put it:
taken as a whole the opinions
of the advocates general
are as much a product of Community view, and of the esprit de corps which characterises the Court as a whole, as are the judgments themselves.
That was given by J. Neville Brown, who wrote "The Court of Justice at the European Community".
By way of explanation, I shall cite a few examples of the esprit de corps of Community sentiment and where it leads. Advocate General Lagrange's opinion in the de Geus v. Bosch case was:
the Court must not be defeated by obscurities or contradictions in the wording of the text for the real meaning can be deduced from the context or the spirit of the text".
Thus, the court is competent, by reference to the "spirit" of the treaty, to fill those gaps. Such teleological interpretation has become an accepted practice in the European Court. In filling the gaps, the court de facto takes a legislative role. It makes law. I refer hon. Members to my earlier comments on the Conseil d'Etat. That is another linkage.
The European Court of Justice has a powerful role in establishing the direction in which Community law evolves. Furthermore, the court has no doubt as to which direction this legislation should take. Advocate General Roemer said:
The European treaties are nothing but a partial implementation of a grand general programme dominated by the idea of complete integration of the European States.
When we look at the court's judgments, it is plain to see that, in filling the legislative role, the court advances the cause of European nationhood. As Lasok and Bridge said:
reference to the spirit or aims of the Treaties enables the Court to fill the gaps in the system and so to 'up-date' the text.


In doing so, the Court has consciously acted not only as the Constitutional Court of the Community but also as an architect of European integration.
The court has not been a protector of nation states' powers, as has been suggested previously. Nor has there been any change in the court's perception of its role. Progression of the European Court is slow at times, and is one of incremental revision.

Mr. Garel-Jones: Would my hon. Friend care to comment on the opinion on international labour organisations which was issued by the European Court only yesterday? If nothing else, I think that it gainsays the point, and shows that, at least recently—certainly since the agreement in Maastricht—the European Court of Justice is increasingly sensitive to and taking account of the position of member states.

Mr. Duncan-Smith: Yes. That is an important point to make. I shall come to it further on in my speech. I talk continually about the fact that the European Court of Justice never moves back on its judgments but always moves forwards, sometimes at a slower pace, sometimes at a faster pace. It takes into consideration what is going on in a general sense politically, but the process is always the same.

Mr. Budgen: The irony of the Minister of State's interruption is that it completely demolishes his point that the European Court of Justice is an independent, apolitical court. All he said was that observations of a political nature had been made throughout the Maastricht process, and that the court now took account of those political views. It is a political court, even though he happens to approve of the political pressures which are now being applied to the court.

Mr. Duncan-Smith: My hon. Friend summarises that point well. It stands on its own.

Mr. Garel-Jones: I shall not respond to the point made by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen).

Mr. Budgen: Why not?

Mr. Garel-Jones: Because I am answering the speech of the person who has caught your eye, Mr. Morris, not interventions. My hon. Friend the Member for Chingford (Mr. Duncan-Smith) says that the European Court of Justice always moves forwards. What about the case that I quoted to him the last time that he made a rather distinguished speech to the Committee? The national insurance case moved exactly in the direction that he and I would wish to see.

Mr. Duncan-Smith: My right hon. Friend raises a case which was referred to on the last occasion, and on the occasion before that on which we debated the matter. I shall deal with that case in due course, if he will bear with me.
The danger is that, if one views the court at only a single point, it may appear no longer to be driven by the dictates of unification. However, if the Committee considers the progression of the court's judgments over time, all becomes clear. At times, the court appears to stop and consolidate its gains before the next advance, but advance it will. By so doing, it gives great power to the Community institutions.
The titanium dioxide case in 1991, in which the European Parliament supported the Commission versus the Council, was a clear example of how the court increases the powers of the Commission and the European Parliament at the expense of the nation states. In effect, when contention as to the basis of voting procedures arises, the qualified majority process is preferred to unanimous voting. That calls into question Ministers' assurances that qualified majority voting will be extended only to those areas to which we agree that it should.
I wish to show the Court's incremental revision. If we examine four cases taken from a period of more than 25 years, it becomes clear that the Court has progressively expanded the domain of Community law. It moves forward, then consolidates, only to move forward again.

Mr. Garel-Jones: We are resuming a debate that we have had before. I have conceded that, in the early stages of the Community's development, the European Court of Justice took what I have referred to as several centripetal decisions. I think that I quoted to my hon. Friend in the Committee's last debate on these matters several cases in the past 12 months.
I do not claim that they represent a complete turnaround. Indeed, it is not for me to anticipate the decisions that the European Court of Justice might take any more than the decisions of the British courts. However, those cases began to move in the opposite direction to the one which my hon. Friend contends that the court always moves in. I should be grateful if the cases which my hon. Friend quoted to the House were moderately recent ones. We are all well aware of cases which took place 10 and 15 years ago.

Mr. Duncan-Smith: My right hon. Friend makes an interesting point. I have said, and I repeat, that I shall come to those cases. I am referring to a period of 25 years which brings us up to the present. I seek to show that the present is still involved as much as the past. I do not seek to avoid what my right hon. Friend asks me to do.

Mr. Garel-Jones: The point that I am seeking to make to my hon. Friend is not that I dispute that decisions 10, 15 and 20 years ago have tended to be centripetal in their thrust, but that, in recent years, and particularly in the light of skilful negotiation by the Prime Minister at Maastricht on article 3b and so forth, a climate is now being created as a result of which a significant number of recent court judgments show sensitivity to the rights of member states which are both important and encouraging.

Mr. Duncan-Smith: If the Minister bears with me, I shall try to point out the reasons why I take a different view.

Sir Teddy Taylor: Before the Minister of State gets carried away by his optimism, will my hon. Friend invite him to speak to the British fishermen who were absolutely appalled at the fairly recent case in which our merchant shipping legislation was torn apart by the court and Spanish fishermen had to be treated as British for national quota purposes? Does my hon. Friend notice that, whenever such a point is raised, the Minister of State always finds an excuse to talk to someone else? Is this not real stuff, affecting real people? Will the Minister stop being carried away by false optimism?

Mr. Duncan-Smith: As usual, my hon. Friend makes a powerful point which stands on its own: I cannot elaborate on it. He is absolutely right: these things affect real people and the judgments of the European Court have a major effect on individuals.

Mr. Marlow: So that my hon. Friend can make a decent spread, there are a few points that—

The Chairman: Order. The hon. Gentleman may make one short intervention.

Mr. Marlow: That was my intention, Mr. Morris, but other hon. Gentlemen have already raised points, and if those points are aggregated to the one that I am about to make, they become a few points.
Is it possible that my right hon. Friend the Minister of State is being a little naive? To a certain extent, do not Europe and the court work as a ratchet? My right hon. Friend said that the European courts have made favourable decisions in terms of nation states in the past 12 months, but during the past 12 months we have been considering the ratification of the treaty. Once the treaty is ratified, bingo—off they go again.

Mr. Duncan-Smith: My hon. Friend makes his point in his characteristic way. I am not sure about bingo, but I am pretty sure about the European Court of Justice. If my right hon. Friend the Minister will bear with me, I hope to cover these points.
I mentioned the historic Van Gend en Loos case previously. It was a landmark of Community law, because it was where the Court first enunciated that the treaties created a new legal order.

Mr. Garel-Jones: What was the date of the case?

Mr. Duncan-Smith: I shall provide the date in a moment. The case established that the treaties created a new legal order based on the principle that Community law produces
direct effects and creates individual rights".
The date of the case was 1963.
From this beginning, the court has taken progressively more expansive views of the principle of direct effect. In the van Duyn ruling of 1974, the court stated that individuals may invoke Community directives before national courts.
In its 1976 ruling, in the Defrenne case, the court applied the principle of direct effect to article 119 on sex equality. It found that the principle of equal pay for men and women laid down in the article was one of the Community's foundations and so had direct effect. It went on to say that national courts
have a duty to ensure the protection of the rights which that provision vests in individuals".
After the 1976 Defrenne ruling, the court paused, consolidating the gains made. Interestingly, in 1978, after Gabrielle Defrenne initiated yet another case, the court indicated that the interpretation of article 119 could not be expanded to the point that it would seem as prescribing equality in respect of all working conditions. Specifically, the court ruled that article 119 did not require identical retirement ages for men and women, even though this would result in differences in pension entitlement.
If an observer of the court had looked at the Defrenne ruling in 1978, he or she might have been tempted to say as my right hon. Friend said recently,
that we are now in a new climate and that that
centralising
tendency is being arrested."—[Official Report, 27 January 1993; Vol. 217, c. 1061.]
In doing so, the observer would be focusing too closely on the immediate circumstances and not on the court's long-term progression.
If we come forward 12 years to the Barber case of 1990, here the court has reversed the 1978 ruling. The court found in the Barber case that
it is contrary to
article 119
to impose an age condition which differs according to sex for the purpose of entitlement to a pension under a private occupational scheme, even if the difference between the pensionable age for men and that for women is based on the one provided for by the national statutory scheme.
That was in 1990.

Mr. Garel-Jones: rose—

Mr. Duncan-Smith: Perhaps I can just finish this point.
In the 1978 decision, the court was simply holding its ground. It was in no way reversing itself. The court may pause for periods, but it does not retrace its steps, so there is a progression—slow, slow, quick, quick, slow.

Mr. Garel-Jones: It will not have escaped the notice of the Committee—I hasten to say that I do not use this to dismiss my hon. Friend's point—that, of the cases that my hon. Friend has quoted, one predates Britain's entry into the Community, two predate the Single European Act and one follows on from it. I am not using this to dismiss my hon. Friend's arguments, because I accept that the thrust of the court has been centripetal for a substantial period. But then my hon. Friend goes on, as the "killer" argument, as it were, to quote the Barber judgment, and again it will not have escaped the notice of the Committee that a protocol in the Maastricht treaty reverses that judgment.
That does two things. It emphasises that it is member states which sign the treaties and, in reversing the Barber judgment in the protocol, it gives us reason to believe—although I cannot anticipate decisions of the European Court—that it will have a significant influence on other judgments that we expect shortly in this area.

Mr. Duncan-Smith: My right hon. Friend raises a point to which I am just about to come, so if he will bear with me I will deal with it now.
The court can afford to take a long view, and will gradually expand the scope of Community law in just the way that it has in the Barber decision. It is impossible for anyone to deny that the Barber case is a significant advance in the reach of Community law. Consternation about its effects for the pension industry has been so acute that, as my right hon. Friend has pointed out, a specific protocol concerning article 119 had to be added to the Maastricht treaty to limit the industry's exposure to retroactive claims. This protocol is nothing more than a rearguard action, designed to contain the damage inflicted by the court's Barber ruling.

Mr. Garel-Jones: rose—

Mr. Duncan-Smith: I would like to make just a little progress before I give way again.
The example of incremental revision that I have just given is not an isolated instance of how the court will expand especially the Commission's powers at the expense of the nation states. Such progression in the court's rulings is an on-going phenomenon, since, in pursuit of its own agenda, the Commission regularly invites the court to revisit and reinterpret the treaty base and the large body of existing Community directives and regulations.
We are in the midst of one such example. As a result of a number of court interpretations of the directive on the transfer of undertakings, United Kingdom law was found by the Commission to be no longer compliant with the original directive. In 1981, when Parliament passed the Transfer of Undertakings (Protection of Employment) Regulations into law, in compliance with the original directive, Ministers did not anticipate how much more widely the scope of this directive would be interpreted.
The Commission's recent action taken against the United Kingdom shows how the Community institutions, working in tandem, can force us to adopt statutes against our will—like clause 62 of the Trade Union Reform and Employment Rights Bill.

Mr. Hoon: I do not want to tempt the hon. Member into misleading the Committee, but the transfer of undertakings directive was passed by a Labour Government, and was not properly translated into United Kingdom law in 1981 by a Conservative Government. That is really the difference. The British Government participated in the process of agreeing the directive, and it is that which the hon. Gentleman ought to concentrate on, rather than trying to wriggle out of the obligation created by the directive. In the way that he has presented it, he has given a very jaundiced view of the process.

Mr. Duncan-Smith: The hon. Gentleman, as usual, makes an important point. I was going to come on to that, because I was about to point out that it was initiated in 1977.

The Chairman: Might I suggest to the hon. Gentleman that he should not give way so often but should get on with his arguments, as he would clearly anticipate most interventions?

Mr. Duncan-Smith: I shall endeavour to follow your guidance, Mr. Morris.
That case is intriguing, because it demonstrates clearly how a policy initiated in 1977 is binding on subsequent Conservative Administrations, causing severe problems for Conservative Governments.
I was disappointed that my right hon. Friend the Minister of State mentioned the same three cases—which I said that I would deal with—that he produced on 27 January as an example of the European Court of Justice's new-found appreciation for the rights of nation states. Those cases do not support the thesis. At best, they demostrate the court marking time, and at worst incremental revision.
The case of the Commission v. Belgium—Wallonian sludge—was particularly obscure. At most, the ruling was ambiguous. The court was highly critical of the Wallonian decree and refrained from ruling against Belgium only because it found conflicting treaty objectives of environmental protection to support the decree. Belgium

was no clear victor; it is important to note that each party had to bear its costs at the end of the case, which says more loudly than words what the court felt about it.
The Sunday trading case that the Minister mentioned is a perfect example of incremental revision expanding the court's powers. In the Stoke-on-Trent judgment, the court revised its previous Torfaen verdict that questions of proportionality should be left to the national courts, and ruled that the European Court had the power and the duty to rule on issues of proportionality—a form of incremental revision.

Mr. Bernard Jenkin: The most important aspect of the Torfaen case is that it was strongly qualified by the words
in the present state of Community law.
That would seem to emphasise that the court sees the development of Community law as an on-going process from which competences are never returned to the member states.

Mr. Duncan-Smith: My hon. Friend has elaborated on my argument, and I am grateful.
In the Equal Opportunities Commission v. Secretary of State for Social Security—

Sir Teddy Taylor: Before he leaves the subject of duty, will my hon. Friend ask the Minister of State, who is so optimistic of the court, to answer the question why, when the Government were presented with five infraction proceedings relating to the transfer of undertakings regulations, they caved in on four without taking them to the court? The only issue left is whether there is a registered trade union or merely workers' representatives.
If the Minister is so sure that things are going nicely on national interests, why did the Government cave in to four of the five Commission demands without putting up a fight? Perhaps he should get advice from the civil service, from the Government or from anyone else. If he is so confident, why did the Government cave in, as the demands were way ahead of the view of the acquired rights directive held by the Conservative Government in 1981, and the previous Labour Government in 1971?

Mr. Duncan-Smith: As usual, my hon. Friend makes a powerful intervention.

Sir Teddy Taylor: Why does the Minister not intervene?

The Chairman: Order. The hon. Gentleman is interrupting the speech of the hon. Member for Chingford (Mr. Duncan-Smith), and the Committee wishes to listen.

Mr. Duncan-Smith: Guided by you, Mr. Morris, I know that my right hon. Friend the Minister has heard that intervention clearly, and I leave it to his judgment to decide at which point he prefers to answer.
I feel that the case that I was discussing before the intervention was an example of the court marking time. It does not like derogations and never has. At best, it sees them as temporary and transitional means. However, that case followed closely on the Barber case, and just as the court was not willing to make that additional leap in the 1978 Defrenne ruling so soon after the significant advance made in the 1976 case, in the EOC-NICs case I believe that the court is biding its time before its next move in that area. Obviously, that is a personal view of the court's exact political involvement in and view of the Community. It is the same pattern—slow, slow, quick, quick, slow.
4.45 pm
There needs to be a positive effort to reform the court. Before we allow it to expand its competence in the way envisaged by the articles under consideration, we must have some controls on the European court and, as the court has clearly stated in Costa v. ENEL:
The transfer by the States from their domestic legal system to the Community legal system of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights, against which a subsequent unilateral act incompatible with the concept of the Community cannot prevail.
Obviously, my right hon. and learned Friend the Attorney-General appreciates that. I refer back to his comments on 22 February, when he pointed out the supremacy of Community law.
National rights will be jeopardised if the court continues to expand its competence unchecked, and if it is permitted to legislate by filling in the gaps left by the treaties and secondary Community legislation.
Maastricht only creates more gaps. A few weeks ago in the Committee, I tried to point out one such gap arising from Maastricht's new social provisions. Other hon. Members have indicated other ways, especially my hon. Friend the Member for Colchester, North (Mr. Jenkin) in his recent comments on subsidiarity.
In his comments on 27 January, my right hon. Friend the Minister of State said that the European Court of Justice was
like the Supreme Court in the United States."—[Official Report, 27 January 1993; Vol. 217, c. 1057.]
That is very interesting. Apart from wondering whether that is accepted by the Government—

Mr. Garel-Jones: I think that I can anticipate my hon. Friend's argument. I made it clear that the Supreme Court in the United States is the supreme court of a single national federal state, which is not what the European Community is or will become. I was seeking to argue that the judgments of courts of that type are cyclical and are influenced by the society that surrounds them. My hon. Friend says that it is a case of quick, quick, slow but it will not have escaped his notice that those are the steps of the waltz, and that one can move forwards and backwards when dancing a waltz.

Mr. Duncan-Smith: I am grateful to my right hon. Friend for clarifying his earlier statesments, but I shall not get involved in that dance as I was never very good in the ballroom.
We therefore require an institutional mechanism to alow us to review Community laws and regulations created by the European court in the manner that I have described.
A comparison has been made with the United States Supreme Court, but the European Court does not have similar constitutional checks and balances to temper its power. Article 55 of the French constitution is an example of such a mechanism. Unlike Britain—where, under the terms of article 3(2) of the European Communities Act 1972, Community law may be directly referred to in our courts—in France a judge may not directly invoke the primacy of Community law but must reason indirectly, via article 55, to dismiss statute law which conflicts with treaty obligations.
Article 55 is the sole channel for Community law in France, giving the French constitutional court the competence

to carry out a direct review of Community law in cases where Community legislation can be fitted into the category of France's 'international commitments'".
Such reviews analyse not the legitimacy of Community law, but its compatibility with domestic law.
Such a system for review is what Britain lacks and most definitely needs. In the short term, to ensure that we retain immediate control of our constitution, I propose that we should adopt the solutions set out by Martin Howe in a recent pamphlet called "Europe and the Constitution after Maastricht".
First, we ought to lay down procedures to be followed when conflicts between Community law and Acts of Parliament arise. Secondly, we must have an express list of protected matters, which no Community law should, under the law of the United Kingdom, be allowed to affect. Thirdly, we should be armed with reserve powers, exercisable by Order in Council, to render specific decisions or acts of the Community institutions of no effect in the United Kingdom in areas which are essential to our national interest and independence.
Those changes would help, but I seek a total reform of the European Court of Justice. In my maiden speech, I suggested that we needed a long-term solution, such as a constitutional court, which would be placed above the Community to take an impartial position on questions which affect the competence of nation states.
The opportunity to reform the court arose at Maastricht, but was not seized. Maastricht advances the power of the court, giving it room for interpretation in so many areas, not least in the social field and convergence criteria, with all the attendant costs.
Ministers' assurances carry little weight when the powers of the European Court are examined closely. How can we believe Ministers when they seek to reassure the House about the interpretation of articles 2 and 3 on social policy, and that we shall not be forced into the restrictive social practices undertaken by the other 11? It will be for the court, not for Ministers, to decide.
How can we accept the assurances of Ministers about our commitment to the second and third stages of the convergence criteria? Again, it will be the court, not they, that ultimately decides. How can we accept from Ministers reassurances about subsidiarity? As my hon. Friend the Member for Colchester, North pointed out, the court will define and make decisions on subsidiarity.
The European Court is now an immensely powerful institution, which I believe to be beyond the control of this or any other nation state. Far from concentrating on this fact at Maastricht and in subsequent debates, we have allowed ourselves to be sidetracked and have even enhanced the court's powers. As we have seen in case after case, ultimate judgment lies with the European Court of Justice, which will seek to hasten the march towards a central unitary European state. The court holds the greatest threat to those who wish to see Europe move in the opposite direction. Maastricht is simply an invitation to continue down the road to a unitary state.

Several hon. Members: rose—

The Chairman: Mr. Budgen.

Mr. Budgen: I did not anticipate being called at this stage.

The Chairman: If the hon. Gentleman does not wish to speak, he does not have to do so.

Mr. Budgen: I do, Mr. Morris.

The Chairman: In that case, the hon. Gentleman should get on with his speech.

Mr. Budgen: I was merely explaining my unusual reluctance to participate in a debate.
The question that has been raised is whether we can trust the European Court. Whether one can trust a court depends upon whether one believes that it is free of political influences. We have just heard an extremely helpful, very learned, extremely well-researched and longish speech from my hon. Friend the Member for Chingford (Mr. Duncan-Smith). My hon. Friend re viewed the court's activities over a considerable period and confirmed our fear that what we have here is an example of what my noble Friend Lady Thatcher used to describe as the ratchet effect. The former Prime Minister did not for a moment pretend that the ratchet moved forward at the same pace all the time. This ratchet is very well maintained by an extremely large bureaucracy staffed by a very large number of extremely intelligent—and, incidentally, extremely well paid—people. That being the case, it was to be expected that it would be operated very intelligently. No doubt the same was said of the inquisition when it was doing its work.

Mr. Michael Spicer: Does my hon. Friend agree that the Maastricht treaty contains the French words "acquis communautaire", which describe the ratchet precisely?

Mr. Budgen: Of course that is true.
My hon. Friend the Member for Chingford is very helpful in the way in which he investigates the background of Community thought regarding the setting up of something that is half a supreme court and half an administrative court. However, he does not emphasise the essential difference between, on the one hand, the French idea of justice and the French idea of the supremacy of the power of the state and, on the other hand, our adversarial system, which is based on disputes between private individuals and, most of all, upon the extremely limited role given to the courts of this country.
For all their grandeur and for all their necessary importance, our courts and judges are but narrow technicians. They are not legislators. It is not their job to talk, for instance, about the moral or political climate. Their job is to look carefully and in detail at provisions and determine their effect on a particular dispute between individuals. Only in the French system are wider political considerations allowed to be brought into play.
I suggest that on this occasion the Government are best condemned from their own mouths. At the last sitting of this Committee my right hon. Friend the Minister of State made for the first time a point that he has made several times today. He said:
Although it would be wrong and inappropriate for me to try to anticipate specific judgments, I believe that there is some evidence that the climate created by the Maastricht negotiations has brought about change."—[Official Report, 11 March 1993; Vol. 220, c. 1182.]
That reference is to changes in the judgments of the European Court. This afternoon, my right hon. Friend said—I may be wrong about this, but I did make a note—that the judgments of the court had been influenced by the skilful negotiation of the Prime Minister at Maastricht.
Let us pause for a moment and decide what is the present status, in Community law, of the Maastricht negotiations. The treaty has not been ratified by all the countries of the Community. It is merely in a preliminary state. It is just as much in a preliminary state as, for instance, Conservative party conference discussions about the criminal law might be. One might even give the treaty a more elevated role by giving as an example the fact that the provisions of a Bill are not binding on the Law Lords before it has been passed by Parliament.
The Minister says that this is not a political court and that it is free of political interference, but he then has the impertinence to say that we have influenced it by our political activity. He says that this is a splendid, independent body, totally impervious to political activity, but that it is watching the political activities of the Prime Minister and doing what my right hon. Friend wants. By way of commendation of these proposals, my right hon. Friend says that this is a court influenced by mood. Our courts are not influenced by mood; they are bound by precedent and statute. They are bound by an extremely narrow interpretation of their duties; they are not bound by mood.
Let me present an argument about mood. There is no doubt that at the time of the Birmingham bombings there was in the country a mood that it would be right for certain persons to be convicted and even hanged—although there was no hanging—as quickly as possible. Would it have been right for the Court of Appeal to take the view that it should operate on the basis of the mood of the country, which was that the rules of evidence which protect suspected persons should be disregarded? At that time people would have been entirely in favour of allowing police officers to fabricate evidence, on the ground that the police knew perfectly well that these people had committed the offences, although, unfortunately, the necessary evidence was not available. But, of course, that is not what was done, because our courts are not bound by mood. Nor, indeed, are they influenced in any way by what politicians say.
Let me give another example. If it is right to say that this court should be influenced by what happened at Maastricht, what would be said were the Lord Chief Justice, dealing with the sentence for a rapist, to say that he had noted with interest and approval the exciting views of my hon. Friend the Member for Billericay (Mrs. Gorman), who has elegantly suggested that such people's goolies should be cut off?
The Lord Chief Justice says, "There is no legislation on the issue, but I am influenced by the political mood of the moment, so I shall order that their goolies be cut off." That is exactly the disgraceful argument that my right hon. Friend the Minister of State advances when he says that the court is not a political body, but it is being influenced by political views of which he approves.
There can be no trust in the institution. If, today, it is being influenced by the political views of the Prime Minister—views that are in no way encompassed by European legislation and in no way bound by European precedent—it is just as likely to be influenced by other forms of political pressure next week when those pressures will seem stronger. It is a political court to which we are giving extra power. We are allowing it to fine people. As my right hon. Friend the Minister of State said, we are


allowing it to decide the fines in the light of the advice offered to it by a political body—the Commission. That is very dangerous.
5 pm
We must understand that our British tradition is to give a court extremely limited powers and leave the process of legislation to our sovereign Parliament. The answers given by my right hon. Friend the Minister of State when he so naively commended the way in which the court was now being influenced by political views of which he approved clearly showed that my right hon. Friend has condemned the court to be known by all the world as a political court, and a court that we cannot trust.

Mr. Spearing: The previous two speeches, which have been constitutional, not party political, in tone, have illustrated the extent to which the European Court of Justice is already superior in many ranges of legislation and statute to the high court of Parliament and even the House of Lords in its judicial function along the Corridor. Today we are being invited to discuss the further extension of those powers. I endorse some aspects of the speeches of the hon. Members for Wolverhampton, South-West (Mr. Budgen) and for Chingford (Mr. Duncan-Smith). The powers belong to a court that is different from the institution of which people in this country automatically think when confronted with the word "court".
The court will be a quasi—if not a full—constitutional court in terms of interpreting titles II, III and IV of the treaty of Rome. Therefore, in some respects, the court to which we are now voluntarily—and possibly irrevocably—sending our powers will be comparable to the Federal Court of the United States. As has been said, the European Court has political angles that do not apply to any of the courts in the United Kingdom.
The preambles of treaties should be taken into account when interpreting the wording of those treaties. Whereas, in this country, if case law is made through a judgment and we then find that it is unworkable—it may have been the right judgment for a specific case, but present complications in relation to another case—the Government can introduce a Bill. Hopefully, that Bill will not be politically contentious and the legislation can be set right, either in that parliamentary Session or the next one. That process will not be possible in future in relation to any matter over which the European Court of Justice has power.
The court's range of opinion is much greater than may at first appear. The hon. Member for Chingford cited some recent cases that are well known, including the Barber case and the Cassis de Dijon case. However, people may not be aware of the following aspects—although I think that some statistics appeared in Hansard not long ago. Where a matter of interpretation in the British domestic court—I use the phrase advisedly—falls within the sphere of Community law, magistrates, justices or their Lordships have to obtain an opinion from the European Court of Justice in Luxembourg. That fact is not always immediately visible. I do not know whether, when he replies, the Attorney-General will tell us whether it is made known at the time that a further opinion has to be taken,

but I doubt whether it is, as I understand that the number of references is already sizeable and will grow. I understand that to be the position today.
The treaty contains further powers, some of which seem mild at present. Articles 126 and 127 on training and education come within the formal upgraded treaty of Rome, as does the issue of health in article 129. I know that article 129 involves co-operation in health matters to ensure that the resources for public health are dealt with effectively and efficiently. But no doubt at some stage an issue will arise where the interpretation of the articles on health and education will come before the European Court of Justice. We know about the famous subsidiarity. Such matters will not fall entirely within the powers of the treaty, which requires subsidiarity to be illuminated, but they will come within the powers of the court—or at least have the potential to do so.
I wish to refer to the powers of the court other than those that fall under titles II, III and IV. The Foreign Secretary and the Prime Minister have made great play of the fact that the power of the European Community will not be as centripetal as it has been. Time and time again they have said that we have stopped the expansion of centralist forces. They claim that we have rolled back those forces in that, whereas the treaty that the Dutch placed before the Community in 1991 had a complete institutional hold, we inserted into that—by our skilful talks at Maastricht—intergovernmental provisions out-side the power of the treaty. I think that the Foreign Secretary and the Prime Minister may have been over-optimistic, as there are more than 50 references to Community institutions inside the the so-called union pillars.
I shall concentrate on those references to the power of the court of justice in relation to home and judicial affairs. Those issues are mentioned in article K. The treaty also includes articles relating to institutions other than the European Court of Justice which deal with foreign and security matters. The title covering foreign and security issues contains no fewer than 22 references to Community institutions.
I wish to talk about further powers that the House of Commons may allow the European Court of Justice. Title VI, article K3.2.(c) sounds as though it is a small matter and indeed it is in small print. However, I am sure that the Attorney-General knows—he has made it clear in correspondence—that article K3.2.(c) gives power of adjudication to the European Court of Justice where a convention has been agreed between the member states. The convention can relate to any of the issues contained in article K.1 which deal with co-operation in the spheres of justice and home affairs.
I am well aware that the convention need not occur. The treaty contains the power to create the conventions, although they are not yet created.
Article K3.2(c) states:
without prejudice to Article 220 of the Treaty establishing the European Community, draw up conventions which it shall recommend to Member States for adoption in accordance with their respective constitutional requirements.
Unless otherwise provided by such conventions, measures implementing them shall be adopted within the Council by a majority of two-thirds of the High Contracting Parties.
The "Council" means the Council of the Community, acting no doubt in its extended intergovernmental role. The article continues:


Such conventions may stipulate that the Court of Justice shall have jurisdiction to interpret their provisions and to rule on any disputes regarding their application, in accordance with such arrangements as they may lay down.
I understand, as I think the whole Committee understands, that before such a convention can be adopted it has to come back to this Parliament for approval under, as the treaty says, "respective constitutional requirements."
So far we have not had a full definition of what shall be the United Kingdom's constitutional requirements. Perhaps the Attorney-General will refer to that. That phrase appears three or four times in the treaty and it is fundamental. It will also apply to further amendments and there is no guarantee that the treaty will not be further amended before 1996. Who knows, there may be need for a further adjustment and the treaty may come back for further constitutional debate and agreement.
I hope that such a constitutional provision would be defined by an Act of Parliament. Would it be appropriate for a convention concerning home and judicial affairs related to the domestic arrangements of the United Kingdom to be dealt with other than by an Act of Parliament or a change to existing legislation, which would require a small Act of Parliament? What is the scope and probability of what the conventions would contain? They are listed in article K1.
One of the features of the reportage of these debates has been the feeling that we are going through the treaty line by line. To some extent we are doing that in so far as procedures allow, and there is a feeling that it is all terribly boring. It is said that people outside cannot understand the debate and that the Committee is following arcane procedures. I have a horrible feeling that in future when the European Court of Justice makes a ruling, as it did in relation to VAT on construction, people will say, "When did Parliament agree to that?"
The so-called Trevi arrangements clearly intend that there shall be conventions and those conventions will affect the matters set out in article K1, which talks about:
1. asylum policy;
2. rules governing the crossing by persons of the external borders of the Member States and the exercise of controls thereon;".
One cannot get much more basic than that about border control.
3. immigration policy and policy regarding nationals of third countries;
I shall not quote the subsections, but they relate to conditions of entry, conditions of residence and the combating of unauthorised immigration.
4. combating drug addiction in so far as this is not covered by 7 to 9;
5. combating fraud on an international scale in so far as it is not covered by 7 to 9;
6. judicial co-operation in civil matters;
8. customs co-operation;
9. police co-operation for the purposes of preventing and combating terrorism, unlawful drug trafficking and other serious forms of international crime, including if necessary certain aspects of customs co-operation, in connection with the organisation of a Union-wide system for exchanging information within a European Police Office (Europol).
I have read those into the record because it is unlikely that United Kingdom citizens are fully aware of some of the treaty's contents. I am worried that this title is presently excluded from the Bill. However, the powers of the European Court of Justice are not. As we know, that court is one of the foundation and fundamental institutions of the European Community and, according to the Foreign

Secretary and the Prime Minister, it is the inner trunk that is supported by the outer pillars. One of the outer pillars, title VI, has the European Court of Justice.
5.15 pm
I have written to the Foreign Secretary about the matter and he kindly wrote to me on 17 March. His letter clarifies the matter, but is rather surprising. I asked him about article K3.2(c) being outside the institutions of the Community and suggested that his claims and that of the Prime Minister about the supports of the edifice were a little exaggerated.

Mr. Andrew Rowe: I am listening with great attention to the hon. Gentleman. He gives the impression that, if the general public understood that some international issues were included in one form or another in the treaty, they would instantly repudiate it. Surely the reverse is the truth. Just as the international law of the sea is justiciable in an international court, a whole range of international problems that are growing in intensity require international treatment. Many of my constituents would be exceedingly relieved if problems such as international terrorism could be dealt with in that way.

Mr. Spearing: I am grateful to the hon. Gentleman for intervening on that issue. His intervention illustrates the theme of the arguments of many hon. Members, that the real content of the treaty of European union—which is the correct title of the treaty—is not as well known as it should be. It is not, and the Government, despite issuing a few publications, do not want it to be better known.
The Minister of State, Foreign and Commonwealth Office enters the Committee at just the right moment. He knows that I and my hon. Friends, including my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), and some Conservative Members support a private Member's Bill called the European Union (Public Information) Bill. It sets out a statutory procedure, which may get more publicity later, by which hon. Members will know what is in the Bill that is before the Committee.
I shall not stray too far from the subject of the debate, but one of the matters contained in our Bill, if the Government allow it to got through—they have objected to it on 15 or 16 Fridays—

The Chairman: Order. Perhaps the hon. Gentleman was not clear about what I said earlier. The matter that he is discussing is out of order. Perhaps he will return to discussing the European Court of Justice about which he was making an interesting contribution.

Mr. Spearing: I was questioned by the hon. Member For Mid-Kent (Mr. Rowe) and—

The Chairman: Order. The hon. Gentleman is an experienced member of the Committee and should not be tempted to go down that route.

Mr. Spearing: I shall return to the correspondence from the Home Secretary.

Sir Teddy Taylor: Before the constituents of my hon. Friend the Member for Mid-Kent (Mr. Rowe) get too excited and optimistic about this great new opportunity, would the hon. Member for Newham (Mr. Spearing) remind him and the Committee that under article L, which


we are discussing, a common foreign and security policy and justice and home affairs are excluded from the jurisdiction of the court?

Mr. Spearing: Some of those matters might have been cleared up if the Government had not taken the action that they did.

Mr. Rowe: On a point of order, Mr. Morris. I would not want it recorded that I was tempting the hon. Member for Newham, South (Mr. Spearing) down the route that he chose when he answered my question, because my question was rather different.

The Chairman: That is firmly on the record and clearly the hon. Member for Newham, South (Mr. Spearing) did not hear the hon. Gentleman's intervention with sufficient clarity. Either way, perhaps we may return to the subject of the European Court of Justice.

Mr. Spearing: In his letter to me dated 17 March, the Minister of State wrote:
As for the potential role of the European Court of Justice under Article K.3(2)(c), you misunderstood the jurisdiction the Court might be given. It would not be the jurisdiction it now has under EEC treaties, nor would its rulings be binding in Community law. It would be ad hoc jurisdiction, conferred and regulated by a member state convention outside the EC framework to interpret that convention and to settle disputes on it. This is exactly the present position on the convention on mutual recognition and enforcements of judgments among the member states agreed in 1968 pursuant to article 220 of the Treaty of Rome. The European Court of Justice rulings on the 1968 convention are given force in UK law not by the European Communities Act but by the 1982 Civil Jurisdiction Act.
That may be news to some of us. I have no doubt that the lawyers among us, including my right hon. Friend the Member for Llanelli (Mr. Davies), may be familiar with that matter.
It is interesting to learn that the European Court of Justice has vires and power in the United Kingdom by Acts of Parliament other than the European Communities Act 1972 and other matters relating directly to it.
That information may be important. No doubt the Attorney-General will confirm when he replies that that which is written into the home affairs article that I just quoted and the power of the European Court of Justice is given dual authenticity by the treaty itself—which is not particularly the concern of the House—by direct legislation and another Act of Parliament.
I put down a marker now because if such a convention comes before the House in due course—which I hope will require another Act—we should have a full explanation, because we would then be putting ourselves under direct European Court jurisdiction on important matters that are claimed to be intergovernmental. Those matters, and others to which the hon. Member for Mid-Kent (Mr. Rowe) referred, are best dealt with in that way, rather than within the rigidities of the European Community as originally established, its central institutions, or the Act of European union that is now being debated.

Mr. Timothy Kirkhope (Lords Commissioner to the Treasury): rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 278, Noes 221.

Division No. 201]
[5.23 pm


AYES


Adley, Robert
Evennett, David


Ainsworth, Peter (East Surrey)
Faber, David


Aitken, Jonathan
Fabricant, Michael


Alexander, Richard
Fairbairn, Sir Nicholas


Allason, Rupert (Torbay)
Fenner, Dame Peggy


Amess, David
Field, Barry (Isle of Wight)


Ancram, Michael
Forman, Nigel


Arbuthnot, James
Forsyth, Michael (Stirling)


Arnold, Jacques (Gravesham)
Forth, Eric


Arnold, Sir Thomas (Hazel Grv)
Foster, Don (Bath)


Ashby, David
Fowler, Rt Hon Sir Norman


Ashdown, Rt Hon Paddy
Fox, Dr Liam (Woodspring)


Atkinson, Peter (Hexham)
Freeman, Roger


Baker, Nicholas (Dorset North)
Gale, Roger


Baldry, Tony
Gallie, Phil


Banks, Matthew (Southport)
Garel-Jones, Rt Hon Tristan


Banks, Robert (Harrogate)
Garnier, Edward


Bates, Michael
Gillan, Cheryl


Batiste, Spencer
Goodlad, Rt Hon Alastair


Bellingham, Henry
Goodson-Wickes, Dr Charles


Beresford, Sir Paul
Grant, Sir Anthony (Cambs SW)


Blackburn, Dr John G.
Greenway, Harry (Ealing N)


Booth, Hartley
Greenway, John (Ryedale)


Boswell, Tim
Griffiths, Peter (Portsmouth, N)


Bottomley, Peter (Eltham)
Grylls, Sir Michael


Bottomley, Rt Hon Virginia
Gummer, Rt Hon John Selwyn


Bowden, Andrew
Hague, William


Bowis, John
Hamilton, Rt Hon Archie (Epsom)


Brandreth, Gyles
Hamilton, Neil (Tatton)


Brazier, Julian
Hampson, Dr Keith


Bright, Graham
Hanley, Jeremy


Brooke, Rt Hon Peter
Hannam, Sir John


Brown, M. (Brigg & Cl'thorpes)
Hargreaves, Andrew


Browning, Mrs. Angela
Harris, David


Bruce, Ian (S Dorset)
Haselhurst, Alan


Bruce, Malcolm (Gordon)
Hawkins, Nick


Burns, Simon
Hayes, Jerry


Burt, Alistair
Heald, Oliver


Butterfill, John
Heath, Rt Hon Sir Edward


Carlile, Alexander (Montgomry)
Heathcoat-Amory, David


Carlisle, Kenneth (Lincoln)
Hendry, Charles


Carrington, Matthew
Heseltine, Rt Hon Michael


Channon, Rt Hon Paul
Hicks, Robert


Chapman, Sydney
Higgins, Rt Hon Sir Terence L.


Churchill, Mr
Hill, James (Southampton Test)


Clark, Dr Michael (Rochford)
Hogg, Rt Hon Douglas (G'tham)


Clarke, Rt Hon Kenneth (Ruclif)
Horam, John


Clifton-Brown, Geoffrey
Hordern, Rt Hon Sir Peter


Coe, Sebastian
Howard, Rt Hon Michael


Colvin, Michael
Howarth, Alan (Strat'rd-on-A)


Congdon, David
Howell, Rt Hon David (G'dford)


Conway, Derek
Hughes Robert G. (Harrow W)


Coombs, Anthony (Wyre For'st)
Hunt, Rt Hon David (Wirral W)


Coombs, Simon (Swindon)
Hunt, Sir John (Ravensbourne)


Cope, Rt Hon Sir John
Hunter, Andrew


Cormack, Patrick
Jack, Michael


Couchman, James
Jackson, Robert (Wantage)


Currie, Mrs Edwina (S D'by'ire)
Johnson Smith, Sir Geoffrey


Curry, David (Skipton & Ripon)
Johnston, Sir Russell


Dafis, Cynog
Jones, Gwilym (Cardiff N)


Davis, David (Boothferry)
Jones, Ieuan Wyn (Ynys Môn)


Day, Stephen
Jopling, Rt Hon Michael


Deva, Nirj Joseph
Kellett-Bowman, Dame Elaine


Dickens, Geoffrey
Kennedy, Charles (Ross,C&S)


Dorrell, Stephen
Key, Robert


Douglas-Hamilton, Lord James
Kilfedder, Sir James


Dover, Den
King, Rt Hon Tom


Duncan, Alan
Kirkhope, Timothy


Dunn, Bob
Kirkwood, Archy


Durant, Sir Anthony
Knight, Mrs Angela (Erewash)


Dykes, Hugh
Knight, Greg (Derby N)


Eggar, Tim
Knight, Dame Jill (Bir'm E'st'n)


Elletson, Harold
Knox, David


Emery, Rt Hon Sir Peter
Kynoch, George (Kincardine)


Evans, David (Welwyn Hatfield)
Lait, Mrs Jacqui


Evans, Jonathan (Brecon)
Lamont, Rt Hon Norman


Evans, Roger (Monmouth)
Lang, Rt Hon Ian






Leigh, Edward
Rowe, Andrew (Mid Kent)


Lennox-Boyd, Mark
Rumbold, Rt Hon Dame Angela


Lester, Jim (Broxtowe)
Ryder, Rt Hon Richard


Lidington, David
Sackville, Tom


Lilley, Rt Hon Peter
Sainsbury, Rt Hon Tim


Lloyd, Peter (Fareham)
Scott, Rt Hon Nicholas


Llwyd, Elfyn
Shaw, David (Dover)


Luff, Peter
Shaw, Sir Giles (Pudsey)


Lyell, Rt Hon Sir Nicholas
Shephard, Rt Hon Gillian


Lynne, Ms Liz
Shepherd, Colin (Hereford)


MacGregor, Rt Hon John
Shersby, Michael


MacKay, Andrew
Soames, Nicholas


Maclean, David
Spencer, Sir Derek


Maclennan, Robert
Spicer, Sir James (W Dorset)


McLoughlin, Patrick
Spink, Dr Robert


Madel, David
Spring, Richard


Maitland, Lady Olga
Sproat, Iain


Major, Rt Hon John
Squire, Robin (Hornchurch)


Malone, Gerald
Stanley, Rt Hon Sir John


Mans, Keith
Steel, Rt Hon Sir David


Marland, Paul
Steen, Anthony


Marshall, John (Hendon S)
Stephen, Michael


Marshall, Sir Michael (Arundel)
Stern, Michael


Martin, David (Portsmouth S)
Stewart, Allan


Mawhinney, Dr Brian
Streeter, Gary


Mayhew, Rt Hon Sir Patrick
Sumberg, David


Mellor, Rt Hon David
Sykes, John


Merchant, Piers
Taylor, Ian (Esher)


Michie, Mrs Ray (Argyll Bute)
Taylor, John M. (Solihull)


Milligan, Stephen
Temple-Morris, Peter


Mills, Iain
Thomason, Roy


Mitchell, Andrew (Gedling)
Thompson, Sir Donald (C'er V)


Mitchell, Sir David (Hants NW)
Thompson, Patrick (Norwich N)


Monro, Sir Hector
Thornton, Sir Malcolm


Montgomery, Sir Fergus
Thurnham, Peter


Moss, Malcolm
Townsend, Cyril D. (Bexl'yh'th)


Needham, Richard
Tracey, Richard


Nelson, Anthony
Tredinnick, David


Neubert, Sir Michael
Twinn, Dr Ian


Newton, Rt Hon Tony
Tyler, Paul


Nicholls, Patrick
Vaughan, Sir Gerard


Nicholson, David (Taunton)
Viggers, Peter


Nicholson, Emma (Devon West)
Waldegrave, Rt Hon William


Norris, Steve
Walden, George


Onslow, Rt Hon Sir Cranley
Wallace, James


Oppenheim, Phillip
Waller, Gary


Ottaway, Richard
Waterson, Nigel


Page, Richard
Watts, John


Paice, James
Wells, Bowen


Patten, Rt Hon John
Wheeler, Rt Hon Sir John


Peacock, Mrs Elizabeth
Whitney, Ray


Pickles, Eric
Whittingdale, John


Porter, Barry (Wirral S)
Widdecombe, Ann


Portillo, Rt Hon Michael
Wiggin, Sir Jerry


Powell, William (Corby)
Wigley, Dafydd


Rathbone, Tim
Willetts, David


Redwood, John
Wolfson, Mark


Renton, Rt Hon Tim
Wood, Timothy


Richards, Rod
Yeo, Tim


Riddick, Graham
Young, Sir George (Acton)


Robathan, Andrew



Roberts, Rt Hon Sir Wyn
Tellers for the Ayes:


Robertson, Raymond (Ab'd'n S)
Mr. David Lightbown and


Robinson, Mark (Somerton)
Mr. Irvine Patnick.


NOES


Abbott, Ms Diane
Bell, Stuart


Adams, Mrs Irene
Benn, Rt Hon Tony


Ainger, Nick
Bennett, Andrew F.


Ainsworth, Robert (Cov'try NE)
Benton, Joe


Allason, Rupert (Torbay)
Bermingham, Gerald


Anderson, Donald (Swansea E)
Berry, Dr. Roger


Anderson, Ms Janet (Ros'dale)
Betts, Clive


Armstrong, Hilary
Blair, Tony


Banks, Tony (Newham NW)
Blunkett, David


Barnes, Harry
Boyce, Jimmy


Barron, Kevin
Boyes, Roland


Battle, John
Bradley, Keith


Beckett, Rt Hon Margaret
Bray, Dr Jeremy


Beggs, Roy
Brown, Gordon (Dunfermline E)





Brown, N. (N'c'tle upon Tyne E)
Illsley, Eric


Burden, Richard
Ingram, Adam


Byers, Stephen
Jackson, Glenda (H'stead)


Caborn, Richard
Jackson, Helen (Shef'ld, H)


Callaghan, Jim
Jamieson, David


Campbell, Mrs Anne (C'bridge)
Janner, Greville


Campbell-Savours, D. N.
Jones, Jon Owen (Cardiff C)


Canavan, Dennis
Jones, Lynne (B'ham S O)


Cann, Jamie
Jones, Martyn (Clwyd, SW)


Chisholm, Malcolm
Kaufman, Rt Hon Gerald


Clapham, Michael
Keen, Alan


Clark, Dr David (South Shields)
Kennedy, Jane (Lpool Brdgn)


Clarke, Eric (Midlothian)
Khabra, Piara S.


Clarke, Tom (Monklands W)
Kilfoyle, Peter


Clelland, David
Kinnock, Rt Hon Neil (Islwyn)


Clwyd, Mrs Ann
Leighton, Ron


Cohen, Harry
Litherland, Robert


Connarty, Michael
Livingstone, Ken


Cook, Frank (Stockton N)
Lloyd, Tony (Stretford)


Cook, Robin (Livingston)
Loyden, Eddie


Corbett, Robin
McAllion, John


Corbyn, Jeremy
McAvoy, Thomas


Corston, Ms Jean
McCartney, Ian


Cousins, Jim
McCrea, Rev William


Cryer, Bob
Macdonald, Calum


Cummings, John
McKelvey, William


Cunliffe, Lawrence
Mackinlay, Andrew


Cunningham, Jim (Covy SE)
McMaster, Gordon


Cunningham, Rt Hon Dr John
McNamara, Kevin


Darling, Alistair
McWilliam, John


Davies, Bryan (Oldham C'tral)
Madden, Max


Davies, Rt Hon Denzil (Llanelli)
Maginnis, Ken


Davies, Ron (Caerphilly)
Mahon, Alice


Davis, Terry (B'ham, H'dge H'l)
Mandelson, Peter


Denham, John
Marek, Dr John


Dewar, Donald
Marshall, David (Shettleston)


Dixon, Don
Marshall, Jim (Leicester, S)


Dobson, Frank
Martlew, Eric


Donohoe, Brian H.
Maxton, John


Dowd, Jim
Meacher, Michael


Dunwoody, Mrs Gwyneth
Michael, Alun


Eagle, Ms Angela
Michie, Bill (Sheffield Heeley)


Eastham, Ken
Milburn, Alan


Evans, John (St Helens N)
Miller, Andrew


Fatchett, Derek
Mitchell, Austin (Gt Grimsby)


Field, Frank (Birkenhead)
Moonie, Dr Lewis


Fisher, Mark
Morgan, Rhodri


Flynn, Paul
Morley, Elliot


Foster, Rt Hon Derek
Morris, Rt Hon A. (Wy'nshawe)


Foulkes, George
Morris, Estelle (B'ham Yardley)


Fraser, John
Morris, Rt Hon J. (Aberavon)


Fyfe, Maria
Mowlam, Marjorie


Gapes, Mike
Mullin, Chris


Garrett, John
Oakes, Rt Hon Gordon


Gerrard, Neil
O'Brien, Michael (N W'kshire)


Godman, Dr Norman A.
O'Brien, William (Normanton)


Godsiff, Roger
O'Hara, Edward


Golding, Mrs Llin
Olner, William


Gordon, Mildred
Orme, Rt Hon Stanley


Grant, Bernie (Tottenham)
Parry, Robert


Griffiths, Nigel (Edinburgh S)
Pendry, Tom


Griffiths, Win (Bridgend)
Pickthall, Colin


Gunnell, John
Pike, Peter L.


Hain, Peter
Pope, Greg


Hanson, David
Powell, Ray (Ogmore)


Harvey, Nick
Prentice, Ms Bridget (Lew'm E)


Hattersley, Rt Hon Roy
Prentice, Gordon (Pendle)


Henderson, Doug
Prescott, John


Heppell, John
Primarolo, Dawn


Hill, Keith (Streatham)
Purchase, Ken


Hinchliffe, David
Quin, Ms Joyce


Hoey, Kate
Raynsford, Nick


Hogg, Norman (Cumbernauld)
Reid, Dr John


Hoon, Geoffrey
Robertson, George (Hamilton)


Howarth, George (Knowsley N)
Robinson, Peter (Belfast E)


Howells, Dr. Kim (Pontypridd)
Roche, Mrs. Barbara


Hughes, Kevin (Doncaster N)
Rogers, Allan


Hughes, Robert (Aberdeen N)
Rooney, Terry


Hughes, Roy (Newport E)
Ross, Ernie (Dundee W)


Hutton, John
Rowlands, Ted






Ruddock, Joan
Taylor, Mrs Ann (Dewsbury)


Sheerman, Barry
Trimble, David


Sheldon, Rt Hon Robert
Walker, Rt Hon Sir Harold


Shore, Rt Hon Peter
Walley, Joan


Short, Clare
Wardell, Gareth (Gower)


Simpson, Alan
Wareing, Robert N


Skinner, Dennis
Watson, Mike


Smith, Andrew (Oxford E)
Wicks, Malcolm


Smith, C. (Isl'ton S & F'sbury)
Williams, Rt Hon Alan (Sw'n W)


Smith, Rt Hon John (M'kl'ds E)
Williams, Alan W (Carmarthen)


Smith, Llew (Blaenau Gwent)
Wilson, Brian


Snape, Peter
Winnick, David


Soley, Clive
Worthington, Tony


Spearing, Nigel
Wright, Dr Tony


Steinberg, Gerry



Stevenson, George
Tellers for the Noes:


Stott, Roger
Mr. Alan Meale and


Strang, Dr. Gavin
Mr. Dennis Turner.


Straw, Jack

Question accordingly agreed to.

Question put accordingly, That the amendment be made:—

The Committee divided: Ayes 56, Noes 279.

Division No. 202]
[5.35 pm


AYES


Adams, Mrs Irene
Loyden, Eddie


Allason, Rupert (Torbay)
McAllion, John


Barnes, Harry
McAvoy, Thomas


Benn, Rt Hon Tony
McCrea, Rev William


Bennett, Andrew F.
Madden, Max


Callaghan, Jim
Mahon, Alice


Canavan, Dennis
Marshall, David (Shettleston)


Cann, Jamie
Marshall, Jim (Leicester, S)


Chisholm, Malcolm
Michie, Bill (Sheffield Healey)


Connarty, Michael
Mitchell, Austin (Gt Grimsby)


Corbyn, Jeremy
Olner, William


Cummings, John
Parry, Robert


Davies, Rt Hon Denzil (Llanelli)
Pickthall, Colin


Davis, Terry (B'ham, H'dge H'l)
Purchase, Ken


Dunwoody, Mrs Gwyneth
Robinson, Peter (Belfast E)


Etherington, Bill
Rowlands, Ted


Field, Frank (Birkenhead)
Shore, Rt Hon Peter


Gerrard, Neil
Simpson, Alan


Godman, Dr Norman A.
Smith, Llew (Blaenau Gwent)


Gordon, Mildred
Snape, Peter


Hanson, David
Spearing, Nigel


Harvey, Nick
Steinberg, Gerry


Hinchliffe, David
Taylor, Sir Teddy (Southend, E)


Howarth, George (Knowsley N)
Trimble, David


Hughes, Roy (Newport E)
Vaz, Keith


Jones, Martyn (Clwyd, SW)
Winnick, David


Kinnock, Rt Hon Neil (Islwyn)



Leighton, Ron
Tellers for the Ayes:


Litherland, Robert
Mr. Bob Cryer and


Livingstone, Ken
Mr. Dennis Skinner.


NOES


Adley, Robert
Booth, Hartley


Ainsworth, Peter (East Surrey)
Boswell, Tim


Aitken, Jonathan
Bottomley, Peter (Eltham)


Alexander, Richard
Bottomley, Rt Hon Virginia


Allason, Rupert (Torbay)
Bowden, Andrew


Amess, David
Bowis, John


Ancram, Michael
Brandreth, Gyles


Arbuthnot, James
Brazier, Julian


Arnold, Jacques (Gravesham)
Bright, Graham


Arnold, Sir Thomas (Hazel Grv)
Brooke, Rt Hon Peter


Ashby, David
Brown, M. (Brigg & Cl'thorpes)


Ashdown, Rt Hon Paddy
Browning, Mrs. Angela


Atkinson, Peter (Hexham)
Bruce, Ian (S Dorset)


Baldry, Tony
Bruce, Malcolm (Gordon)


Banks, Matthew (Southport)
Burns, Simon


Banks, Robert (Harrogate)
Burt, Alistair


Bates, Michael
Butterfill, John


Batiste, Spencer
Carlile, Alexander (Montgomry)


Bellingham, Henry
Carlisle, Kenneth (Lincoln)


Beresford, Sir Paul
Carrington, Matthew


Blackburn, Dr John G.
Channon, Rt Hon Paul





Chapman, Sydney
Hordern, Rt Hon Sir Peter


Churchill, Mr
Howard, Rt Hon Michael


Clarke, Rt Hon Kenneth (Ruclif)
Howarth, Alan (Strat'rd-on-A)


Clifton-Brown, Geoffrey
Howell, Rt Hon David (G'dford)


Coe, Sebastian
Hughes Robert G. (Harrow W)


Colvin, Michael
Hunt, Rt Hon David (Wirral W)


Congdon, David
Hunt, Sir John (Ravensbourne)


Conway, Derek
Hunter, Andrew


Coombs, Anthony (Wyre For'st)
Jack, Michael


Coombs, Simon (Swindon)
Jackson, Robert (Wantage)


Cope, Rt Hon Sir John
Johnson Smith, Sir Geoffrey


Cormack, Patrick
Johnston, Sir Russell


Couchman, James
Jones, Gwilym (Cardiff N)


Currie, Mrs Edwina (S D'by'ire)
Jones, Ieuan Wyn (Ynys Môn)


Curry, David (Skipton & Ripon)
Jopling, Rt Hon Michael


Dafis, Cynog
Kellett-Bowman, Dame Elaine


Davis, David (Boothferry)
Kennedy, Charles (Ross,C&S)


Day, Stephen
Key, Robert


Devlin, Tim
Kilfedder, Sir James


Dickens, Geoffrey
King, Rt Hon Tom


Dorrell, Stephen
Kirkhope, Timothy


Douglas-Hamilton, Lord James
Kirkwood, Archy


Dover, Den
Knight, Mrs Angela (Erewash)


Duncan, Alan
Knight, Greg (Derby N)


Dunn, Bob
Knight, Dame Jill (Bir'm E'st'n)


Durant, Sir Anthony
Knox, David


Dykes, Hugh
Kynoch, George (Kincardine)


Eggar, Tim
Lait, Mrs Jacqui


Elletson, Harold
Lamont, Rt Hon Norman


Emery, Rt Hon Sir Peter
Lang, Rt Hon Ian


Evans, David (Welwyn Hatfield)
Leigh, Edward


Evans, Jonathan (Brecon)
Lennox-Boyd, Mark


Evans, Roger (Monmouth)
Lester, Jim (Broxtowe)


Evennett, David
Lidington, David


Faber, David
Lightbown, David


Fabricant, Michael
Lilley, Rt Hon Peter


Fairbairn, Sir Nicholas
Lloyd, Peter (Fareham)


Fenner, Dame Peggy
Llwyd, Elfyn


Field, Barry (Isle of Wight)
Luff, Peter


Forman, Nigel
Lyell, Rt Hon Sir Nicholas


Forsyth, Michael (Stirling)
Lynne, Ms Liz


Forth, Eric
MacGregor, Rt Hon John


Foster, Don (Bath)
Maclean, David


Fowler, Rt Hon Sir Norman
Maclennan, Robert


Fox, Dr Liam (Woodspring)
McLoughlin, Patrick


Freeman, Roger
Madel, David


Gale, Roger
Maitland, Lady Olga


Gallie, Phil
Major, Rt Hon John


Garel-Jones, Rt Hon Tristan
Malone, Gerald


Garnier, Edward
Mans, Keith


Gillan, Cheryl
Marland, Paul


Goodlad, Rt Hon Alastair
Marshall, John (Hendon S)


Goodson-Wickes, Dr Charles
Marshall, Sir Michael (Arundel)


Gorst, John
Martin, David (Portsmouth S)


Grant, Sir Anthony (Cambs SW)
Mawhinney, Dr Brian


Greenway, Harry (Ealing N)
Mayhew, Rt Hon Sir Patrick


Greenway, John (Ryedale)
Mellor, Rt Hon David


Grylls, Sir Michael
Merchant, Piers


Gummer, Rt Hon John Selwyn
Michie, Mrs Ray (Argyll Bute)


Hague, William
Milligan, Stephen


Hamilton, Rt Hon Archie (Epsom)
Mills, Iain


Hamilton, Neil (Tatton)
Mitchell, Andrew (Gedling)


Hampson, Dr Keith
Mitchell, Sir David (Hants NW)


Hanley, Jeremy
Monro, Sir Hector


Hannam, Sir John
Montgomery, Sir Fergus


Hargreaves, Andrew
Moss, Malcolm


Harris, David
Needham, Richard


Haselhurst, Alan
Nelson, Anthony


Hawkins, Nick
Neubert, Sir Michael


Hayes, Jerry
Newton, Rt Hon Tony


Heald, Oliver
Nicholls, Patrick


Heath, Rt Hon Sir Edward
Nicholson, David (Taunton)


Heathcoat-Amory, David
Nicholson, Emma (Devon West)


Hendry, Charles
Norris, Steve


Heseltine, Rt Hon Michael
Onslow, Rt Hon Sir Cranley


Hicks, Robert
Oppenheim, Phillip


Higgins, Rt Hon Sir Terence L.
Ottaway, Richard


Hill, James (Southampton Test)
Page, Richard


Hogg, Rt Hon Douglas (G'tham)
Paice, James


Horam, John
Patnick, Irvine






Patten, Rt Hon John
Sumberg, David


Pawsey, James
Sykes, John


Peacock, Mrs Elizabeth
Taylor, Ian (Esher)


Pickles, Eric
Taylor, John M. (Solihull)


Porter, Barry (Wirral S)
Taylor, Matthew (Truro)


Portillo, Rt Hon Michael
Temple-Morris, Peter


Powell, William (Corby)
Thomason, Roy


Rathbone, Tim
Thompson, Sir Donald (C'er V)


Redwood, John
Thompson, Patrick (Norwich N)


Renton, Rt Hon Tim
Thornton, Sir Malcolm


Richards, Rod
Thurnham, Peter


Riddick, Graham
Townsend, Cyril D. (Bexl'yh'th)


Robathan, Andrew
Tracey, Richard


Roberts, Rt Hon Sir Wyn
Tredinnick, David


Robertson, Raymond (Ab'd'n S)
Twinn, Dr Ian


Robinson, Mark (Somerton)
Tyler, Paul


Rowe, Andrew (Mid Kent)
Vaughan, Sir Gerard


Rumbold, Rt Hon Dame Angela
Viggers, Peter


Ryder, Rt Hon Richard
Waldegrave, Rt Hon William


Sackville, Tom
Walden, George


Sainsbury, Rt Hon Tim
Wallace, James


Scott, Rt Hon Nicholas
Waller, Gary


Shaw, David (Dover)
Wardle, Charles (Bexhill)


Shaw, Sir Giles (Pudsey)
Waterson, Nigel


Shephard, Rt Hon Gillian
Watts, John


Shepherd, Colin (Hereford)
Wells, Bowen


Shersby, Michael
Wheeler, Rt Hon Sir John


Soames, Nicholas
Whitney, Ray


Spencer, Sir Derek
Widdecombe, Ann


Spicer, Sir James (W Dorset)
Wiggin, Sir Jerry


Spink, Dr Robert
Wigley, Dafydd


Spring, Richard
Willetts, David


Sproat, Iain
Wolfson, Mark


Squire, Robin (Hornchurch)
Wood, Timothy


Stanley, Rt Hon Sir John
Yeo, Tim


Steel, Rt Hon Sir David
Young, Sir George (Acton)


Steen, Anthony



Stephen, Michael
Tellers for the Noes:


Stern, Michael
Mr. Nicholas Baker and


Stewart, Allan
Mr. Andrew MacKay.


Streeter, Gary

Question accordingly negatived.

Mr. Ted Rowlands: On a point of order, Mr. Morris. I seek your guidance. We are about to embark on a debate of a group of nearly 50 amendments. You and the hon. Members who have been present during the Committee stage will remember that there was considerable confusion about the character and nature of amendment No. 27. In a statement, the Foreign Secretary said:
In summary, the Law Officers consider that, while incorporation of the protocol in domestic law is desirable, it is not necessary for ratification or implementation of the Maastricht treaty."—[Official Report, 15 February 1993; Vol. 219, c. 27.]
We desperately need your advice, Mr. Morris, or possibly that of a Minister through you, as to which of the 50 amendments, which cover a number of protocols and articles, fall into the "desirable" category and which fall into the "necessary" category for ratification. Otherwise, we shall not know the level of seriousness that we are to give to each amendment. The Committee was caught completely by surprise when it found that amendment No. 27 was desirable but not necessary for ratification. May we have some advice and information as to which amendment falls into which category?

The Chairman: First, that is not a matter for the Chair. Secondly, we have not started yet, so no one can rule on anything until the procedure is under way.
Without further ado, we shall consider the European system of central banks and national banking arrangements. We lead with amendment No. 36, with which we shall consider the others listed on the selection paper. I call Mr. Andrew Smith.

Mr. Andrew Smith: rose—

Mr. Peter Hain: On a point of order, Mr. Morris.

The Chairman: I hope that this is a new point of order and not the same one that we have just had.

Mr. Hain: It is, Mr. Morris. I wonder whether—[Interruption.] It certainly is a new point of order. I wonder whether, with your indulgence, Mr. Morris, the Attorney-General could give a ruling on whether amendment No. 36, if carried, would actually —

The Chairman: Order. The hon. Gentleman is anticipating. The amendment has not even been moved yet.

Mr. Andrew Smith: I beg to move amendment No. 36, in page 1, line 9, after 'II', insert
'(except Article 107 on page 22 of Cm 1934)'.

The Chairman: With this, it will be convenient also to discuss the following: Amendment No. 84, in page 1, line 9, after 'II', insert
'(with the exception of those Articles and Protocols set out in Schedule [Monetary Policy and the establishment of the European System of Central Banks]).'.
Amendment No. 86, in page 1, line 9, after 'II', insert
'(other than Article 108a)'.
Amendment No. 87, in page 1, line 9, after 'II', insert
'(other than Article 108)'.
Amendment No. 101, in page 1, line 9, after 'II', insert
'(except Article 106 on page 22 of Cm 1934 which relates to the European Central Bank)'.
Amendment No. 197, in page 1, line 9, after 'II', insert
'except Article 4a on page 11 of Cm 1934'.
Amendment No. 325, in page 1, line 9, after 'II', insert
'(except Article 105 on page 21 of Cm 1934)'.
Amendment No. 326, in page 1, line 9, after 'II', insert
'(except Article 105a on page 21 of Cm 1934)'.
Amendment No. 327, in page 1, line 9, after 'II', insert
'(except Article 108 on page 22 of Cm 1934)'.
Amendment No. 328, in page 1, line 9, after 'II', insert
'(except Article 109 on page 23 of Cm 1934)'.
Amendment No. 372, in page 1, line 9, after 'II', insert
'except Article 104 as referred to in Article in G on page 19 of Command Paper number 1934'.
Amendment No. 373, in page 1, line 9, after 'II', insert
'except Article 104a as referred to in Article G on page 19 of Command Paper number 1934'.
Amendment No. 374, in page 1, line 9, after 'II', insert
'except Article 104b as referred to in Article G on page 19 of Command Paper number 1934'.
Amendment No. 375, in page 1, line 9, after 'II', insert
'except Article 105a as referred to in Article G on page 21 of Command Paper number 1934'.
Amendment No. 376, in page 1, line 9, after 'II', insert
'except Article 109 as referred to in Article G on page 23 of Command Paper number 1934'.
Amendment No. 377, in page 1, line 9, after 'II', insert
'except Article 109a as referred to in Article G on page 23 of Command Paper number 1934'.
Amendment No. 378, in page 1, line 9, after 'II', insert
'except Article 109b as referred to in Article G on page 24 of Command Paper number 1934'.
Amendment No. 379, in page 1, line 9, after 'II', insert


'except Article 109d as referred to in Article G on page 25 of Command Paper number 1934'.
Amendment No. 408, in page 1, line 9, after 'II', insert
'(except Article 30 of Protocol 3 on the Statute of the European System of Central Banks and the European Central Bank on pages 97 and 98 of Cm 1934).'.
Amendment No. 49, in page 1, line 10, after '1992', insert
'but not Article 105 in Title II thereof'.
Amendment No. 50, in page 1, line 10, after '1992', insert
'but not Article 107 in Title II thereof'.
Amendment No. 59, in page 1, line 10, after '1992', insert
'but not the Protocol on the statute of the European System of central banks and of the European Central Bank.'.
Amendment No. 253, in page 1, line 10, after '1992', insert
'but not Article 37 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 254, in page 1, line 10, after '1992', insert
'but not Article 42 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 255, in page 1, line 10, after '1992', insert
'but not Article 31.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 256, in page 1, line 10, after '1992', insert
'but not Article 34.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 257, in page 1, line 10, after '1992', insert
'but not Article 29 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 258, in page 1, line 10, after '1992', insert
'but not Article 30 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank".
Amendment No. 259, in page 1, line 10, after '1992', insert
'but not Article 21.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 260, in page 1, line 10, after '1992', insert
'but not Article 28.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 261, in page 1, line 10, after '1992', insert
'but not Article 18.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 262, in page 1, line 10, after '1992', insert
'but not Article 19.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 263, in page 1, line 10, after '1992', insert
'but not Article 14.4 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 264, in page 1, line 10, after '1992', insert

'but not Article 16 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 265, in page 1, line 10, after '1992', insert
'but not Article 14.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 266, in page 1, line 10, after '1992', insert
'but not Article 14.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 267, in page 1, line 10, after '1992', insert
'but not Article 10.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 268, in page 1, line 10, after '1992', insert
'but not Article 12.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 269, in page 1, line 10, after '1992', insert
'but not Article 7 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 270, in page 1, line 10, after '1992', insert
'but not Article 6.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 271, in page 1, line 10, after '1992', insert
'but not Article 2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 272, in page 1, line 10, after '1992', insert
'but not Article 5.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'.
Amendment No. 441, in page 1, line 10, after '1992', insert
'but not the Protocol on France on page 117 of Cm. 1934'.
Amendment No. 442, in page 1, line 10, after '1992', insert
'but not the Protocol on Portugal on page 114 of Cm. 1934'.
New clause 1—Annual Report by Bank of England—
.—'In implementing Article 108 of Title II of the Treaty on European Union, and ensuring compatibility of the statutes of the national central bank, Her Majesty's Government shall, by order, make provision for the Governor of the Bank of England to make an annual report to Parliament, which shall be subject to approval by a Resolution of the Commons House of Parliament.'.
New clause 58—Accountability of European Central Bank—
' .In implementing the provisions of Article 108 of Title II of the Treaty on European Union, the Commons House of Parliament shall consider annually the European Central Bank report provided for in Article 109b(3) on the activities of the European System of Central Banks and on the monetary policy of both the previous and current year.'.
Amendment No. 85, new schedule:—
'MONETARY POLICY AND THE ESTABLISHMENT OF THE EUROPEAN SYSTEM OF CENTRAL BANKS

(1) Article 105.
(2) Article 105a.
(3) Article 106.
(4) Article 107.
(5) Article 109a.
(6) Article 109b.
(7) Protocol on the Statute of European System of Central Banks and of the European Central Bank.'.

Mr. Smith: Let me make it clear that amendment No. 36, as with similar amendments tabled in other groups, is a probing amendment, and it is not our intention to press it to a vote. However, new clause 1 and new clause 58, which we have also tabled, are also in the group, and


they relate to the important questions of the accountability of the Bank of England and of the European central bank. We intend to press those to a vote.
I make it clear at the outset that the Labour party's views on the issues before us are set in the context of the vital importance of two requirements: first, that the provisions of article 2 of the treaty set the goals of the Community, and that the economic institutions of the Community are obliged to put those goals into effect; and, secondly, that ECOFIN—the Council of European Finance Ministers—must be strengthened not only as the proper political counterweight to the system of central banks but as an effective co-ordinator of Community policies for jobs and sustainable growth. An important complaint about the Government's record is that during their presidency of the Community they took no initiative to give ECOFIN that enhanced role.

Sir Teddy Taylor: Will the hon. Gentleman make it clear that new clause 1 is a joke, because it simply says that there should be an annual report? That will have no impact, and there will be no power, because we shall simply talk about the annual report. The issue behind amendment No. 36 is whether a central bank should be democratically accountable. As a member of the Labour party and a friend of democracy, surely the hon. Gentleman should support an amendment saying that a central bank that will run our economy should be democratically accountable in some way. Was that not Labour party policy?

Mr. Smith: I well understand the hon. Gentleman's lack of confidence in the Conservatives' custodianship of accountability and democracy. I shall take no lectures from him or from any other Conservative Member on those issues. New clause 1 would not merely require an annual report to be submitted to the House, but would provide the opportunity for a vote on it. That would give the House a form of accountability that is not available to it now. Therefore, it would strengthen rather than weaken accountability.

Mr. Tony Benn: It is correct that there is no annual report, but my hon. Friend will know that under the Bank of England Act 1946, passed by a very right-wing Labour Chancellor, Hugh Dalton, the Bank of England became publicly owned, the Treasury could give instructions to the Bank of England on any matter that it wished for which accountability existed, and the bank could give instructions to any other bank that it wished—and the Treasury defined what a bank was. There could be no clearer example of governmental and parliamentary accountability for the Bank of England. Am I right in supposing that that is what the Front-Bench spokesmen wish to abandon?

Mr. Smith: Later in my speech I shall deal with the 1946 Act. Indeed, I intended to quote what Hugh Dalton said on Second Reading of that Act. In the light of my right hon. Friend's characterisation of Hugh Dalton, I might reconsider that intention—but the point that I was making still stands good: the House would receive a report that it does not now receive, and would have the opportunity to vote, which it does not now have.

Mr. William Cash: The hon. Gentleman's new clause refers to
ensuring compatibility of the statutes of the national central bank.
In the light of the protocol on the European Monetary Institute stage 2, let alone stage 3, is the hon. Gentleman saying that he expects section 4 of the Bank of England Act 1946 to be repealed? In other words, does he want an independent central bank in this country? If so, how does he relate that to the concession that he has already made, in that there will be no arrangements for the central bank in Europe to be accountable?

Mr. Smith: I shall deal with those issues in a moment, but it is clear to me that if the House of Commons, and Britain, want to honour the terms of the Maastricht treaty, those matters must be examined. There can be no doubt about that, but it would be premature to prejudge now precisely what form of amendment would be necessary to ensure compatibility between our statutes and the treaty.

Mr. Marlow: rose—

Mr. Smith: I should like to make a little more progress, if I may.
In debating the group of amendments and, to some extent, the two groups that will follow, the Committee is engaged in that most precarious of activities against which politicians are wisely cautioned—answering hypothetical questions. That is so, because—

Mr. Austin Mitchell: Will my hon. Friend give way?

Mr. Smith: I shall give way in a moment.
We have to answer hypothetical questions because none of us can be sure whether the European central bank and its associated system will be established under the Bill—or rather, under the treaty—whether economic and monetary union will proceed and, if it does, whether that will happen precisely according to the timetable and provisions of the Maastricht treaty. The terms of such a move to stage 3 would in any case have to be placed before Parliament in future. Indeed, our amendment No. 35, which will be dealt with in the later group of amendments concerning European monetary union, is an attempt to set the circumstances in which that could happen.
It is interesting that the German Parliament incorporated a similar provision during its deliberations approving the Maastricht treaty.

Mr. Austin Mitchell: rose—

Mr. Smith: I give way to my hon. Friend.

Mr. Mitchell: I am grateful to my hon. Friend; he has been most generous in giving way.
Surely the question is not hypothetical. It is no use saying that we shall have to consider such matters later. The treaty is specific:
When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body.
We shall not be able to give instructions to the Bank of England on the lines of the 1946 Act. It will therefore have to be changed.

Mr. Smith: I take my hon. Friend's point, but let me repeat that what is in the Bill is conditional on certain things happening before progress towards economic and monetary union can proceed. Indeed, our amendments set further conditions to be satisfied before progress to the third stage of economic and monetary union can take place. Those amendments were designed precisely to meet the concerns expressed within the Labour party and beyond.

Mr. Rowlands: I apologise for interrupting my hon. Friend again, but he cannot make that case. There is a specific and clear commitment in article 14.2 of the protocol on the statutes of the bank:
The statutes of the national central banks shall, in particular, provide that the term of office of a Governor of a national central bank shall be no less than 5 years";
and article 14.1 says that the statutes of the national bank must be
compatible with this Treaty and this Statute.
In other words, if we pass the treaty we shall bind for the future the terms and character of any national bank that we may have.

Mr. Smith: We should be binding the future of the central bank only if we proceeded to economic and monetary union, and that depends on conditions yet to be assessed by the Committee and upon which the Committee will have a further opportunity for debate.

6 pm

Mr. Cash: On a point of order, Mr. Lofthouse. I am sure that the hon. Gentleman in no way seeks to mislead the Committee, but, under article 8 of the protocol relating to the European Monetary Institute, no instructions may be given or sought by the Governor of the Bank of England. If the hon. Gentleman confuses matters by continually referring to stage 3 when stage 2 contains those provisions, the Committee could be seriously misled.

The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse): I hope that the hon. Gentleman will not confuse the occupant of the Chair by raising points of order that are not points of order.

Mr. Smith: The hon. Member for Stafford (Mr. Cash) has not been slow to contribute to the Committee's proceedings in the past, and I am sure that he will have an opportunity later to make those points—quite possibly at some length.
As regards the United Kingdom, that conditionality arises from the treaty; from the challenges to and weaknesses within the exchange rate mechanism; and also from the Government's deliberate decision to seek to buy peace in their own ranks—unsuccessfully, as we have seen—by trying to face both ways at once, on the issue of economic and monetary union as on so much else.
Although at one level that strategy might seem quite clever, enabling us, the Government have argued, to retain a right to a voice in the shaping of the system while leaving until later any decision whether to take part in that system, at other levels it is deeply flawed. First, it leaves the Government with apparently nothing to say on the important question of the principle of participation in economic and monetary union for Europe—surely one of the most important political decisions of our times.
Secondly, the Government's very agnosticism encourages those who would see some viability in Europe

developing on a multi-speed basis—a Europe of several divisions in which Britain was not in the top division. I believe that such speculation is dangerous not only for Europe but for Britain. As a consequence of the Government's economic failures, people are coming to believe that Britain is not capable of first-division status. Let me make it clear that the Labour party does not find acceptable any prospect for closer European co-operation and integration that does not have Britain firmly in the first division.
There is a real danger that some of our Community partners will finally lose patience with the Tories' two-faced foot dragging and decide that some of the Twelve should push on alone with economic and monetary union. That would be a serious blow. It would make Britain a less attractive place in which to invest, thereby jeopardising still more jobs. It would threaten Britain's position as a leading international financial centre. Most serious of all, it would once again leave the United Kingdom in the position of having at some future date to apply to join a union that others had taken the lead in establishing and has therefore had the decisive influence in shaping.
Already, with the United Kingdom opt-outs in the Maastricht treaty, Britain's inability to stay within the ERM and the underlying weakness of the British economy, the United Kingdom is being marginalised and is losing opportunities to shape important events. The Government's position on the European system of central banks and the position of the Bank of England could well reinforce those already very damaging signals, locking Britain out and depriving us of the influence that we need over the evolution of Community monetary policy. As with other aspects of the Bill, the choice facing us is not between influence through the pooling of sovereignty on the one hand and influence outside that pooling on the other; it is a choice between influence through the Community and precious little influence at all.
On the question of the status of the central banks, it is clear that the European central bank would need to be independent in its day-to-day organisations.

Sir Teddy Taylor: Why?

Mr. Smith: For reasons that I am about to explain. Without the establishment of a European Government and a European Finance Ministry—the apparatus of the European super-state to which we are not committed and to which Conservative Members who intervene from a sedentary position are wholeheartedly opposed—there is no political institution under whose day-to-day control it would be practical to place the bank, even if such a prospect were acceptable to our European partners, which plainly it is not.

Mr. Ken Livingstone: So you are going to leave it to the bankers?

Mr. Smith: Does my hon. Friend wish to intervene?

Mr. Livingstone: What my hon. Friend is saying is absolutely true. There is no political structure to oversee the bank, so the powers will go to an unelected committee of bankers—not even a committee of bankers in which each nation has a vote of equal weight. The votes are weighted to reflect GDP, so our vote will be one of the smallest per head of population in the Community. Who will take vital political decisions affecting the parity of the


new European currency against the dollar and the yen and determine our interest rates? I agree with everything that my hon. Friend says, but will he now tell us whether he is happy to leave it to the bankers?

Mr. Smith: My hon. Friend is wrong on the last point, because article 109 of the treaty specifically provides that the Council of Finance Ministers shall set exchange rates of the European currencies against currencies outside the Community and, what is more, that the decision of the Council in that respect shall be binding on the banking system. Far from the bankers having control over the politicians, as my hon. Friend suggests, it will be the other way round.
I said that there was not a political institution to exercise day-to-day control over a European central bank. The question of having and building up the role of an institution that can set the economic policy framework within which the bank has to operate—and to which, in my view, it ought to be accountable—as well as setting the external exchange rate of the Community currencies is quite another matter.
In that respect, it is important to ensure that, as a counterpart to the position of the European central bank, European economic policy co-ordination under article 103 is more effectively exercised jointly by the member states, through an enhanced role for ECOFIN. We address those matters in amendment No. 420, which falls in a subsequent group. In relation to an evaluation of the provisions of the treaty dealing with the central bank, it is important that ECOFIN should be strengthened.

Mr. Ron Leighton: My hon. Friend is right in saying that it is the Council that will have control over the exchange rate of the ECU. The same arrangements will apply as with the Bundesbank. The Bundesbank does not control the exchange rate of the mark. That is why it allows the strange arrangement with east Germany. The Bundesbank is responsible for the internal value of the mark. The central bank would be a bank based on the model of the Bundesbank, which has an extremely large measure of independence and autonomy.

Mr. Smith: My hon. Friend confirms that the Bundesbank—which I agree has, to a large extent, been taken as a model for the banking arrangements in the treaty—operates within a politically determined context of economic policy. On important issues such as the exchange rate and the parity between the deutschmark and the ostmark, it was the Government and the accountable politicians whose view prevailed and not that of the bank. My point was that ECOFIN needed to be strengthened.

Mr. Benn: My hon. Friend and I and every hon. Member may well be candidates in a general election. Suppose that the arrangements go through. What can my hon. Friend say about the economic policy of his party—or any party—that could conceivably be implemented if that party were elected, given that the decisions will be taken not by elected people but by the bank and ECOFIN, which may reflect quite different opinions which could not in any way be influenced by a change of Government in any one country?

Mr. Smith: What I would say, and what I am sure the Labour party would say, is that, in government, we would be using our influence in Europe to press for co-ordinated

policies for economic expansion and jobs so that the Community became an engine of recovery and not an instrument of deflation.
In returning to the question of the status of the central bank, I should make clear Labour's first key demand. It is that the European central bank must be established through public ownership and that the Bank of England must remain in public ownership. There can be no question, as some have suggested there might be, of the bank being privatised.

Several hon. Members: rose—

Mr. Smith: I must make progress.
When Hugh Dalton, the then Labour Chancellor of the Exchequer, moved the Second Reading of the measure which nationalised the Bank of England, he said that there were two key arguments to support it. He said:
The first is that this Bill in effect brings the law into relation with the facts as they have gradually evolved over the years… The second line of argument is even more important. It is that by this Bill we ensure a smooth and efficient growth of our financial banking system in order to meet the new needs for the future"—[Official Report, 29 October 1945; Vol. 415, c. 46.]
We now best promote the needs of the Community and of the United Kingdom for an effective central banking system by holding faith with the principles that Hugh Dalton set out 48 years ago. The bank must remain in public ownership and it must be made clear, contrary to what some have supposed, that privatisation is not an option. It would be neither in the public interest nor in the interests of the effective discharge of the responsibilities of a modern central bank.

Sir Peter Tapsell: The hon. Gentleman speaks of the need for the Bank of England to be in public ownership after the arrangements come into effect. What would be the point of the British people owning a Bank of England which would be just a provincial branch of the European central bank?

Mr. Smith: Precisely so that the body follows objectives which are in the public interest, determined within a democratically accountable political context, rather than pursuing the interests of private shareholders; and I shall say more about the legal status of the bank.
Our second key concern is with accountability, which, while it is not the same as the day-to-day control of the bank, remains important. Indeed, this examination of the issues provides us with an opportunity to take a radical look at the functions and organisation of the central banking system to ensure that they serve the people and the needs of the future.
We on the Opposition Benches have made it clear that we believe there is a strong case for examining the separation of the responsibilities that the bank has for monetary matters from its role in supervising financial institutions. Now is the time to consider going further in making the bank more accountable and representative, for example, of regional, industrial and employment needs.
Our new clause 59 called for precisely such reform of the membership of the governing council of the bank in the context of the Bill. Sadly, it has not been selected for debate. But our proposal in new clause 1, which has been selected, would be a big step forward in making the bank more accountable. There would be a report to Parliament, a debate and a vote. There would be more accountability directly to hon. Members. Further, there would be


transparency in relations between the bank and the Government of the day, which would open up decision-taking in economic policy, with benefits in terms of public scrutiny and confidence.

Mr. Marlow: The hon. Gentleman explained the purposes of new clause 1 and said that we would debate it and vote on it. Has he considered the position if the vote goes in favour of the new clause? What would be the result here and in Europe? What would it do for European legislation? The hon. Gentleman said that we want to be in the first division if there is a two-speed Europe. That must mean our currency being something like the franc fort, as it has been under socialist France. That has resulted in the socialists getting less than 18 per cent. of the vote in the general election there. Is that what the hon. Gentleman wants for his party in this country?

Mr. Smith: I should have thought, following President Clinton's remarks last night, that the hon. Gentleman would have hesitated before suggesting interfering in the elections of other countries. I should also have thought that a vote in this House which rejected the report of the Governor of the Bank of England or the report on the European system of central banks would be taken very seriously indeed. The hon. Gentleman should not minimise the influence that we could have via that route.
Our next area of concern is the relationship between the European central bank and the system of central banks and the politically determined framework for economic policy in the Community. In particular, we are concerned that ECOFIN should operate as a politically accountable counterpart of any European central bank. It is important to appreciate that the treaty as drafted gives ECOFIN a role in monetary policy.
For example, as I pointed out to my hon. Friend the Member for Brent, East (Mr. Livingstone), under article 109, the responsibility for exchange rate policy rests with the Council. That applies to exchange rate system agreements in relation to non-Community currencies and in the negotiation of such agreements which, as that article makes clear, are binding on the European central bank.
In the medium term, ECOFIN sets the economic framework for monetary policy, for example, through its responsibilities for the broad guidelines of economic policy and for multilateral surveillance under article 103. We want ECOFIN to be strengthened in its role and resources, and to have a permanent secretariat, a subject to which we shall return on a later group of amendments dealing with the transitional second and third stages of EMU. But in terms of monetary policy, it is clearly desirable that any European central bank should report to ECOFIN. That is the sort of issue that should be considered further when the intergovernmental conference takes place in 1996.

Mr. Peter Shore: My hon. Friend is placing enormous importance on ECOFIN and the powers that a revised ECOFIN might have. Why, if that is on the agenda of the European Community, have no powers been vested in ECOFIN, other than the one which the treaty mentions and my hon. Friend quoted, which is the power to decide the external exchange rate value of the ecu? Why has no other power been given to

ECOFIN? Is it because all the other member states do not agree that it should be in the treaty in that way, or is it simply that my hon. Friend is indulging in wishful thinking?

Mr. Smith: I am not indulging in wishful thinking. I have argued that the powers should be strengthened, but my right hon. Friend should not underestimate the importance of the responsibilities that ECOFIN has under the treaty. As I said, those responsibilities apply not merely to the determination of the external exchange rate, important though that is for the conduct of monetary policy, but also to multilateral surveillance and the co-ordination of the economic policies of the member states. That, too, is of central importance, and we want it enhanced so as to provide effective co-ordinated European action for sustainable growth and jobs and for the realisation of the other tasks and targets for the Community as set out in article 2.

Mr. Nigel Forman: This is my first intervention in the Maastricht debate. There is advantage in at least half the argument that the hon. Gentleman is adducing—namely, his argument in favour of a degree of statutory accountability to the House of Commons for a future central bank in this country. That would at least ensure a degree of open accountability to this Parliament, as is the case in Washington and the Federal Reserve to Congress, unlike the present position, which has lasted since the Bank of England Act 1946, with closed accountability to the Chancellor of the Exchequer of the day. The hon. Gentleman is right in that part of his argument.

Mr. Smith: I have said that there would be increased transparency in relations between the bank and the Government and, for that matter, between the bank and the House of Commons.
As for enhancing the powers of ECOFIN, we note that the Foreign Secretary was recently reported to be scouting around for ideas for Britain to submit to the intergovernmental conference to be held before the end of 1996. We generously donate the proposal that the powers of ECOFIN be substantially enhanced. I hope that the Foreign Secretary will carry the proposal forward and acknowledge its genesis.
In debating this matter, it is important that we do not react as a House of Commons or, more widely, as a country with the rancid conservatism of old institutions resisting change, rather than engaging constructively in the possibilities of change. As Will Hutton, the economics editor of The Guardian, said at a meeting on this subject, one of the specific difficulties which many in Britain, and especially in England, have with the concept of an independent central bank is grappling with the concept of pluralism in political and economic institutions.
We need to recognise that there can be democratically determined public institutions working within a framework of law which have an obligation to pursue defined objectives of public interest in ways which are accountable but which are free from day-to-day control of the Government, if never dissociated from their influence and the wider policy framework. If we are to progress to economic and monetary union in Europe, this is the light in which we must judge the status of the central bank and the Bank of England.

Mr. Denzil Davies: My hon. Friend talked about the day-to-day activities of a central bank. By "day-to-day", he means the fixing of interest rates. Is he saying that it is preferable that that should be done solely by bankers or, ultimately, by the Chancellor of the Exchequer and the Prime Minister, as it is in Britain at present?

Mr. Smith: First, day-to-day control, even of short-term interest rates, will inevitably be influenced by the policy on the external value of the exchange rate, which, as the treaty makes clear, is a matter for the politically accountable ECOFIN. The second point is how much long-term freedom Britain will have to set interest rates within the context of an increasingly powerful European economic union.
If we are to progress to economic and monetary union in Europe, the light in which we must judge the status of the central bank and the Bank of England is that which recognises the possibilities of genuine pluralism within accountable institutions that serve the public interest.
The challenges before us with regard to this part of the Bill present an opportunity for reform—to make it not so much a Bank of England, but rather more a bank for Britain, just as we would expect the European central bank to serve the interests of the Community as a whole with regard to the goals of article 2 of the treaty and within a framework of democratically co-ordinated economic policy. Those are our aims. I commend new clause 1 and new clause 58 to the Committee.

Sir Peter Tapsell: I have always thought that one of the redeeming features of the Rome treaty is that it did not seek to regulate financial matters. That has permitted the enormous increase in the volume of international financial business which has taken place in the City of London during the 35 years that I have worked in those markets, and has enabled that increase to take place without being hindered in any way by Brussels.
It is difficult to believe that during the 1970s—broadly speaking, a period of great weakness for the British economy and British manufacturing industry—the Eurodollar and Euroyen markets were established in the City of London. To this day, the City of London has remained the capital of those vast markets, which earn an enormous amount of foreign exchange for the United Kingdom and give us influence in the world which perhaps we do not achieve in many other respects. It is difficult to believe that, if we had been subject to interventions from Brussels and the Commission in the 1970s and subsequently, and if a European central bank had been in place which was anxious to develop financial centres in different parts of Europe, that degree of success could have been achieved by the City of London.
The continental financial centres have always been intensely jealous of London's primacy and will certainly use the provisions of the Maastricht treaty to reduce it. Perhaps it is worth noting that, before 1973, when we entered the Common Market, we had a surplus in our trade with the then six countries of the European Economic Community which has since turned into a massive deficit. During that same period, the European financial primacy of the City of London steadily increased. The contrast is striking between the industrial position where we have been increasingly the subject of European

provisions and the financial position where we have been free to pursue our traditional policies of trading with the world.
In contrast with the Rome treaty and the Single European Act, financial provisions lie at the heart of the Maastricht treaty. Its core is economic and monetary union. The engine of such union is to be the European central bank. As fiscal and monetary policies should march together in any properly conducted economic policy, economic and monetary union which is operated by a European central bank will take away from those nation states which make up the European union the freedom to issue their own currency, to choose their own interest rates, exchange rates, the level of their money supply and the level of their public expenditure and to decide the level of their own taxation.
In other words, European and monetary union will remove all the characteristics, of sovereignty which characterise a proud and independent nation, and which still to this day give to the British one of the few binding characteristics of discipline that entitle us to call ourselves a great nation. All that will be put at risk. The European central bank, together with the Commission, will have the exclusive right to exercise all the powers throughout Europe to which I have referred and the sole power to print money and control the currency which the British will use.
Effectively, the European central bank will become the most powerful economic, and therefore political, institution in the Community—indeed, in the whole free world. With 12 or more Ministers of Finance to play off against one another, any skilful president of the European central bank will be in a more powerful position that Mr. Delors has ever been. As the directors of the bank will be explicitly, deliberately and absolutely unelected, unaccountable and unassailable, I do not know what the hon. Member for Oxford, East (Mr. Smith) meant when he said that we will have to be careful in those circumstances to ensure that the Bank of England remains in public ownership. It will not matter two hoots who owns the Bank of England or, indeed, whether there is a Bank of England in the circumstances laid down by the Maastricht treaty.
The hon. Member for Great Grimsby (Mr. Mitchell) read out article 107 on a point of order before the debate. At the risk of boring the Committee I should like again to put on the record in my speech just what article 107 says. The words of article 107 are perfectly clear. A child of 16 could understand them. I am rather bored with people telling me not to bother to take the words of the treaty seriously.
I am rather bored with Ministers, retired ambassadors and grandees in the City taking me on one side and saying in a patronising way, "Can't you be a little more sophisticated in your approach to the Maastricht treaty? We all understand that the treaty is a nonsense. It is absolutely unworkable. It will never take effect. But, my boy"—I am getting somewhat elderly to be addressed in that way, but that is the tone of voice—" if we vote against the Maastricht treaty, we shall lose all our influence in Europe. Therefore, you must vote for this ludicrous, unworkable treaty. Don't let's worry about the wording of it."


Ministers who sign contracts and treaties without worrying about the wording will be in some danger of being thought to have wined and dined a little too frequently with their Italian counterparts.

Mr. Giles Radice: When did the hon. Gentleman last dine with an Italian Minister?

Sir Peter Tapsell: I have not dined with an Italian Minister for some months. The last time was with the then Foreign Minister of Italy, who is now being prosecuted for corruption.

Sir Ivan Lawrence: I hesitate to interrupt my hon. Friend's flow, but does he agree that the warning that we shall lose influence if we do not sign up to the Maastricht treaty is exactly the same as the warning that will be given in 1997 when we refuse to sign up to the single currency, the central bank and central economic control? The same argument will hold. If we do not do it, we shall lose influence in Europe. That is not what the Government have in mind to do. There is an illogicality about their actions.

Sir Peter Tapsell: I agree with my hon. and learned Friend. If I might make a party political point on behalf of the Conservative party, I have never been able to understand the political thinking that, although we have theoretically opted out of the single European currency and economic and monetary union until 1996, we shall seize the nettle in 1996 on the eve of the next general election. When we do that, Lord Cardigan at Balaclava will look like a cunning strategic manoeuvrer by comparison with the Conservative party. The Whips alone will be asked to charge the guns.
Article 107 is the governing paragraph. There are an immense number of selected articles, paragraphs and protocols. I am not an expert on the treaty like many of my hon. Friends. I have been referred to several other subsections but it seems to me that article 107 is clear. It says:
When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies"—

Sir Ivan Lawrence: Shall.

Sir Peter Tapsell: Indeed, shall—
from any government of a Member State, or from any other body. The Community institutions and bodies and the governments of the Member states undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.

Mr. Winnick: Will the hon. Gentleman give way?

Mr. Leighton: Will the hon. Gentleman give way?

Sir Peter Tapsell: I shall draw two conclusions from article 107, and then I shall give way.
First, the words seem perfectly clear. Secondly, new clause 1 and new clause 58 drive a coach and horses through article 107. With respect, I slightly differ on the new clauses we are debating from my hon. Friends the

Members for Southend, East (Sir T. Taylor) and for Stafford (Mr. Cash), who made the point a few moments ago about these Labour amendments.
I shall deal with the provisions of the Federal and Reserve Board and the Bundesbank later. I am rather more familiar with them than with the treaty. However, the fact remains that we shall not be allowed to influence the European central bank in any way. Any body or individual which sought to do so could presumably be summoned before the European Court and punished by a fine.

Mr. Winnick: A few moments ago, the hon. Gentleman said that it did not make any difference whether the Bank of England existed under the proposed arrangements. Would not the same apply to the House of Commons? If such power is to be transferred, as undoubtedly it will be, what will be left to the House of Commons?
The hon. Gentleman read out article 107. Monetary policy will be decided in the way in which article 107 makes clear. The House could debate various matters in a county council way, but on major financial and monetary policies, power will have been transferred. Therefore, not merely the Bank of England but our parliamentary and democratic institutions are at stake.

Sir Peter Tapsell: I agree with the hon. Gentleman, who represents a part of England which I contested in my first by-election almost 40 years ago. He speaks with admirable black country good sense. May I add that one of the reasons why these debates take so long is that we all seem to prompt each other with helpful remarks. While I entirely agree with both the interventions that I have taken so far, they only delayed my speech. They echoed things that I intended to say rather less gracefully in my own speech. So if I am not to speak at inordinate length, I should be grateful to be allowed to put the anti-Maastricht case unassisted by my friends.

Mr. Leighton: I hope that I shall not take the hon. Gentleman away from his speech. He read out article 107, which says that the institutions must not seek to influence the central bank. Does he understand that to include the famous ECOFIN?

Sir Peter Tapsell: The hon. Member for Oxford, East quoted article 109. It says that the Council would have to be unanimous in acting on anything to do with the external exchange rate. I see the Financial Secretary shaking his head. I am not a lawyer. In any case, lawyers never seem to agree about anything in the treaty. If we have a single currency, it is difficult to envisage 12, 15 or 18 Finance Ministers agreeing on the correct external exchange rate for us all. In the past 18 months, we in Britain wanted a different external exchange rate from that which Germany wanted. I simply cannot envisage all the Ministers agreeing.
I shall press on with my speech now. I have quoted article 107. We are expressly forbidden by the treaty from ever seeking to influence the decisions taken by a group of unelected foreigners. Those decisions will have the most profound impact on the welfare, prosperity, employment and wealth of our constituents.
It is incomprehensible to me how the Labour party can have become sympathetic to the treaty. I have always been accused of being a left-wing Tory. I am proud of that. One of my characteristics throughout my political life has been


my passionate concern to maintain the highest possible level of employment. I thought that the White Paper of 1944 which laid down a full employment policy and a target for unemployment of 3 per cent., and which was agreed by all the parties at the time, set the correct aim. It may be difficult to achieve, but it is the correct aim.
It is absolutely certain that, if we enter into the arrangements for a single central bank and a single currency, the system will be banker-dominated, and levels of unemployment throughout Europe will for ever be much higher than most of us in Britain would want to see. Those on the Labour Front Bench must understand that, in supporting the financial provisions of the Maastricht treaty, they are voting for permanent high unemployment in Britain. I am not making a party political point; it is my profound conviction that that is the certain consequence of the policy. I do not deny that it may have other advantages in terms of future inflation and so on, but I am absolutely certain that it will lead to permanent high unemployment in Britain.

Mr. Clive Betts: Is the hon. Gentleman saying that there is any realistic possibility for Britain as an independent nation outside the European Community achieving the full employment that he seeks as an objective? Is he saying that the alternative is to be outside the European Community in order to have any realistic chance of achieving those objectives?

Sir Peter Tapsell: I am not suggesting that we should leave the European Community. In 1961, I voted in favour of the original application to join the Common Market. I also voted in favour of the Single European Act and the acceptance of the treaty of Rome. Our membership of the European Community is not at risk.
I am convinced that, if we remain within the Community and the single European market, we can pursue an extremely successful industrial and financial policy trading with the whole world, and that we would have a much more successful role in that position than if we were part of a European monetary and political union.

Mr. Jenkin: Will my hon. Friend give way?

Sir Peter Tapsell: I really must get on; otherwise, I shall never finish. I have not even begun to approach the core of my speech.

Mr. Jenkin: Is my hon. Friend aware of a country which in 1966 took a negative approach towards the European Community in defence of its national interests and left an empty chair? However, since then, France has established itself very much at the heart of the European Community. I saw an article written at the time by my noble Friend Lord Lawson pointing out that we could now join the European Community, as France had left an empty chair. Although France took an anti-communautaire attitude, it subsequently established itself at the heart of the European Community.

Sir Peter Tapsell: My hon. Friend is absolutely right. Of course, France will always be a leading state in the European Community, as will Britain. However, France has already suffered terribly from its franc fort policies and its continued membership of the exchange rate mechanism. Last Sunday, the people of France gave a clear

indication of their feelings, which they will reaffirm next Sunday. My expectation is that there will be fundamental changes in French economic policy in the months ahead.
I am glad to see my hon. Friend the Financial Secretary in his place, because I want to refer to our friendly exchanges on 14 January, which underline my anxieties and the differences between the declared policies of Ministers, whatever their private views may be, and the views that I express in public.
As has been echoed by the hon. Member for Oxford, East and others, hon. Members, friends and business associates around the world have often asked me why I am so concerned about an independent central bank, when the United States and Germany have independent central banks. To my astonishment, Lord Lawson was apparently a secret believer in an independent central bank. Like the Prime Minister, he was part of a silent minority. Apparently there were a lot of silent minorities in Lady Thatcher's Cabinet.
As there are independent central banks in Germany and the United States, which are clearly democratic countries, people ask me why I am concerned that we cannot do the same in Britain and Europe. I want to address that argument.
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On 14 January 1993, I asked my hon. Friend the Financial Secretary:
since, throughout our history we have never thought it right to establish an autonomous central bank, run by our own fellow countrymen, why should we now in any circumstances wish to set up an autonomous central bank run by foreigners
My hon. Friend replied:
If my hon. Friend…takes the view that in no circumstances can he contemplate a monetary authority that is not, first, combined with economic policy…and second, that is responsible 100 per cent. to the House, he clearly cannot in any circumstances support a single currency that circulates in 12 member states of the European Community. That is the consequences of taking such a position.
As I said at the time, my hon. Friend the Financial Secretary puts matters with absolute clarity, and those words of his exactly express my position and the reasons for it.
He went on:
It seems to me rather odd to argue that the United States or Germany…are any less democratic as the result of the institutions that they have chosen to establish.
I said:
May I define what I mean by autonomous? I mean a central bank that is not democratically accountable to democratically elected Ministers answerable to a democratic assembly. So even if we had a single European currency, I would argue strongly that we need to have a single European bank that is democratically accountable and answerable—and that is what we do not have in the Maastricht treaty.
My hon. Friend the Financial Secretary replied:
I understand the point that my hon. Friend makes, but I invite him to design a workable system for a European central bank that is politically accountable to a European political process. I do not believe that it will be easy to do".—[Official Report, 14 January 1993; Vol. 216, c. 1141–42.]
That is absolutely true. It is not a question of it not being easy to establish a European central bank that is democratically accountable; it is impossible. The Financial Secretary in effect admitted that. He may wish to qualify that answer when he replies to the debate, but I congratulated him at the time on his clarity.
I should like to consider the word "independence". The present Governor of the Bank of England, for whom I have great personal regard and for whose recent personal


bereavement we all feel extremely sad, said that he favoured an independent central bank, as did his nominated successor. I wonder whether they really mean what they say.
The word "independence" is often misused. The matter rests not on independence but on accountability. Real independence—that is, non-accountability to a democratically elected body or democratically chosen Ministers—is not possible in a democratic society, as my hon. Friend the Financial Secretary accepted in his reply to me on 14 January.
Let me turn first to the Fed in the United States, and examine to what extent it is really independent and unaccountable. I have had a lot to do with the Fed in the past 30 years. I have known the last four chairmen, and I think I know how the Fed works. I have been there perhaps 30 or 40 times in my life, and I have sat in on all sorts of functions there and attended congressional inquiries, and I feel that I understand how the Fed works. It bears not the smallest resemblance to the European central bank that is described in article 107, which I read out, and in all the supporting provisions of the Maastricht treaty.
In the United States of America, the Federal Reserve Board is wholly accountable to Congress. I invite Ministers to ask any governor of the Fed or any senior congressman or senator whether the Fed is accountable to Congress. The answer will be yes. The Fed was established by Congress, the law governing every activity of the Fed can be changed at any time by Congress, and the Fed remains wholly accountable to Congress. The governors of the Fed have a legal obligation to report to Congress twice a year.
That is why I do not dismiss out of hand new clause 1 and new clause 58—because, much though I dislike the entire concept, if we were to have something like these Treaty provisions, new clause 1 and new clause 58—if it could be Europeanised, as it were, and not just a British provision—would be some help towards moving the European central bank in the direction of what happens with the Fed in the United States.

Mr. John Butterfill: I am following what my hon. Friend says with great interest. Can he just enlighten me as to whether the Fed takes direction from Congress on the conduct of monetary policy or whether it retains an independence in its day-to-day actions in that regard?

Sir Peter Tapsell: It is extremely difficult to give a one-sentence answer to that. It certainly does not take direct instructions.

Mr. Hugh Dykes: Ah.

Sir Peter Tapsell: It is no good my hon. Friend saying, "Ah." Of course it does not take direct instructions like the Bank of England does. The Secretary to the Treasury in America does not stand up, as Lord Lawson, I think mistakenly, did, and announce that he has moved interest rates up or down. It always used to be announced by the Bank of England, and I think that it was a mistake when the Chancellor openly said that he was making the decisions. In any event, that does not happen with the Fed. On the other hand, in the way that I am going to explain, it is subject to tremendous and effective political pressures.
The obvious example of that was at the beginning of President Reagan's first Administration, when there was considerable divergence of opinion on monetary policy between the Fed, most of whose members had been appointed by President Carter, and President Reagan. In the end, President Reagan got his way, but there was a very open debate in the United States, and the chairman of the Fed had to appear repeatedly before Congress and be cross-examined in front of the television cameras, with the whole nation watching and with all the commentators writing. In the end, the Fed came round to accommodate the Reagan economic policies. That is roughly how it works.
I am not suggesting that the Fed takes instructions from the Secretary to the Treasury—the system in America is different—but it does not destroy my argument that the Fed—

Mr. Dykes: It does destroy the argument.

Sir Peter Tapsell: My hon. Friend says that it destroys my argument, but it does not, for reasons that I will explain. The Fed has a legal obligation to report to Congress twice a year. The report is published. The chairman of the Fed is summoned before a congressional committee and is cross-examined at length and in detail on television. These are the basic legal requirements in the United States.
In practice, the chairman of the Fed is frequently questioned by Congress, and usually in front of the television cameras—more than once a month. A former chairman of the Fed complained to me a few years ago that an excessive amount of his time throughout the year was taken up in preparing for congressional interviews and cross-examination, because he was concerned that he might inadvertently, under questioning, mislead markets as to his real intentions. He said that it was very difficult to appear for two hours before a congressional committee and say nothing, which was his intention.
So, far from the chairman of the Fed not being accountable, he is extremely accountable in all these ways, and none of this bears the smallest resemblance to the arrangements in article 107, where nobody is supposed to be allowed to bring any pressure to bear at all on the operation of the European central bank.

Mr. Forman: I am following my hon. Friend's magisterial speech as closely as I can. Is it not a fact that there is much in the arrangements that have evolved in the United States which is not only attractive in regard to what it does for genuine parliamentary accountability in this area but could provide a model for the future development of the European Community? What I have in mind is a matching of the degree of ex post accountability to the European Parliament for the European system of central banks in future with a similar, transparent accountability, again ex-post, to this Parliament for our own, more independent, central bank in this country. Will my hon. Friend accept that it could be a viable model for future development towards European monetary union?

Sir Peter Tapsell: I agree with my hon. Friend in the points that he has made. If we were to have a European central bank and European union—I am against both concepts—the Fed would be a much better model for us to take than the unworkable, totally undemocratic and unaccountable arrangements set out in the Maastricht


treaty. But it is the Maastricht treaty that we are debating, after all, and we have no amendment before the Committee, suggesting that the European central bank be modelled on the Fed. I would be making a rather different speech if that were the case.
The Fed's inability to manoeuvre in exchange rate policy, even short term, is also a major constraint on its independence. The hon. Member for Oxford, East mentioned the fact that this European central bank would not have such complete powers in exchange rate policy as it would have with the internal currency. That matches the arrangements of the Bundesbank. People often point out that the Bundesbank is not as independent as it seems, because, when the two Germanies came together, Chancellor Kohl was able to override President Pöhl's well known wishes about the exchange rates between the two Marks. The same thing happened with the Anschluss in 1938 under the Reichsbank, when Hitler insisted on a much closer relationship between the Austrian schilling and the German deutschmark than the Reichsbank, under Dr. Schacht, wanted, but that is a different point.
Having no responsibility for exchange rate policy at all greatly limits the Fed's powers in the monetary sphere. As I understand the Maastricht treaty, the European central bank would have much more control over exchange rate policy than has the Fed in the United States, where it is specifically excluded from exchange rate policy.
If Congress were to decide that it did not like the way the Fed behaved, at any time it could change the law governing the Fed's activities. But the House of Commons would not be able to do that once the provisions of this treaty came into force. No doubt, if the 12 or 15, or more, nation states that made up the European union ever agreed on a change, it could be brought about, but it is quite unrealistic to suppose that this House alone would be able to make any significant changes to the working of the European central bank. So there is another great difference between the relationship of the Fed to the democratic assembly to which it is answerable and the relationship that the European central bank would later have to this House or this country, or even to the European Community.
Article 107 of the treaty would be anathema to Congress. It would be inconceivable, intolerable and unacceptable if it were to be applied to their own union of states. So why, I ask, do we think that it is acceptable for us? When the Financial Secretary asked me on 14 January why, when the United States had an independent central bank in the Federation, I was worrying about a central bank for Europe, that is the American part of my answer.

Sir Peter Hordern: Perhaps that is one reason why the protocol states that article 107
shall not apply to the United Kingdom.
My hon. Friend may care to reflect on that.
I totally accept that the Federal Reserve Board is accountable to Congress, which treats it in just the way that he describes. However, I think he gave the Committee the impression that there was a glorious period for most of our history when we were totally independent—we had our own way of fixing our currency and were independent of any other country. May I remind him that we were members of the Bretton Woods agreement and were wholly dependent on the United States dollar and the Federal Reserve, and had no independence of any kind?

7 pm

Sir Peter Tapsell: On the first of my hon. Friend's two points, I accept that, because of the opt-out aspect of the protocol that he referred to, we are not governed by that article. As he will know, however, we have to seize that nettle in 1996. Earlier, I pointed out the great political disadvantages if the Conservative party has to go through all these appallingly divisive arguments again on the eve of the next general election. To contemplate doing so would seem to be madness in party political terms, but that is what we are doing by putting off the decision until 1996. That is one reason why I have thrown in my lot completely with the anti-Maastricht group. It is better to get the argument out of the way now, in the first year of this Parliament, than to go through it all again in its last year.
On the question of how independent Britain has ever been, obviously its independence has varied enormously. Prior to Napoleon's Berlin decree codifying the continental system, people were telling Pitt that he had lost independent control of the British currency. It is true that, under Bretton Woods, because of the acute dollar shortage after we had sold our assets all over the world to pay for the war, we were to a large extent in tutelage to the United States, but we escaped it. My hon. Friend the Member for Horsham (Sir P. Horden) suggests that we should now put ourselves in tutelage to the Bundesbank and the German mark, in replacement of the United States currency. I have the highest regard for the United States, but I do not wish us to be one of its colonies; nor do I wish us to live in a German colony.
Everyone talks as though the Bundesbank were such a marvellous organisation that we all ought to model our banks on it. Indeed, I understand that other European countries, such as France, Portugal and Spain, are busy rewriting the provisions for their central banks, with the help of Bundesbank officials, to model them on Bundesbank lines.
One of the things to remember about the Bundesbank, as it is presently constituted, is that it is far more accountable—in the best sense of the word—than the proposed European central bank. Earlier I described what I meant by independence. The Bundesbank is much more accountable than most people realise. For instance, the German Minister of Finance always attends its board meetings, and although he does not have a vote at its council meetings, he is permitted to speak.
I understand from German friends who have held the position that the Minister of the day often speaks at length and with great force at such meetings. He also has the constitutional right to propose motions, although he cannot vote on them, and he can request that the delay of a decision by two weeks. All those are important aspects of accountability, which are built into the Bundesbank's, provisions and there are other more technical arrangements, but I shall not weary the House with those.
None of that accountability is written into the Maastricht treaty for a European central bank and there is not even a suggestion that the President of the Council of Finance Ministers can attend its meetings, address it, ask it to do this or that, or to delay a decision for a fortnight. If one is to believe article 107, the bank will not be accountable to anyone.

Mr. Barry Legg: Another important difference between the Bundesbank and the


European central bank is that the former works with the grain of German public opinion, but a European central bank will not be answerable to any public opinion, because there is no European public opinion as such.

Sir Peter Tapsell: Yes, the latter part of my hon. Friend's comments is true, but I would not presume to comment on the extent to which the Bundesbank operates with the grain of German public opinion. A number of leading German industrialists have been critical of its monetary policies during the past 18 months. The chairman of Deutsche Bank has publicly criticised it, so there is no unanimity, in Germany even, about the wisdom of the Bundesbank's monetary policies. There is no doubt that, for historic reasons, the Bundesbank enjoys enormous prestige in Germany, but that does not mean that it commands universal support for all that it does.
Directors from the German regional central banks outnumber the Bundesbank's directors. The appointment of regional directors has a strong political element, and they feel politically beholden to the people who have appointed them, who are the Mayor Daleys of the German provinces. I do not know any German, but I think that they are called the länder—as most of them are borrowers, I find that confusing. The regional directors are expected to champion the economic interests of their region, and they do so.
As the Chancellor of the Exchequer discovered to his dismay before 16 September, on their way to Frankfurt to attend meetings, the regional directors give little press conferences designed to show their local Bavarian newspaper or wherever what good chaps they are. This may not help the Finance Minister of another country who is desperately trying to protect the parity of his currency. Nevertheless, that is an example of the fact that the Bundesbank is a good deal more accountable than it appears on the surface.
The central bank that I know best is the Bank of Japan, although it is not often mentioned. The Japanese economy has been rather a success story—although it is going through a difficult patch—during the past 25 years, but we hardly ever hear the Bank of Japan quoted as an example for us to model ourselves on. That bank is wholly subordinate to the Japanese Government. The present governor of the Bank of Japan is a distinguished former Treasury official, and he does exactly what the Japanese Cabinet tells him to do. So there is no proof that independence and non-accountability alone or necessarily produce great economic success.
King William III, who was a Dutchman—perhaps the Dutch have a flair for that sort of thing—established our central bank to be independent but accountable, and to be run by our fellow countrymen. Ten of the 11 other member states have always followed suit and have had accountable central banks.
We are told that the Chancellor sings in his bath, but I have less operatic tendencies when I am in my bath. Sometimes I lie there and wonder how we can be prepared to hand over the control of our central bank to a group of foreigners under German domination. I wonder what King William III would have thought about that when he drew up the original charter for the Bank of England
to promote the public good and well-being of our people"—

of our people. We may be sure that the Bundesbank will never allow a European central bank to manage and issue a single currency which, whatever its name, is anything but the deutschmark in disguise. That is a political and economic fact of life. Nor do I blame it for that. If I were German I should certainly hold that view.
Would any German banker in his senses, or, for that matter, any German citizen or saver, want to have the value of his money—his savings and his wages—determined by a secret compromise with the Greek, Italian and Portuguese directors of the European central bank, whose main interest in the Community is to receive handouts from the richer countries and to protect themselves from their own politicians, for whom they have the utmost contempt? To anybody who has ever moved in the real banking world, the idea is absolutely preposterous. With the great influence of the Whips Office, it is certain that, if the Maastricht provisions for a central bank ever come into force, they will rapidly prove to be totally unworkable.
The history of ideas is always significant and worthy of study. As a boy, I trained as an historian, and reading history has always been my main hobby. When one is told that there is nothing so irresistible as an idea whose time has come—which is what people say, or used to say, about European monetary union—I like to think about the history of the idea. We have all read Marx and Engels—at least, Conservative Members have—and we have all wondered how different the Communist utopia would have been if the first Communist revolution had occurred in some country other than Russia. Chinese leaders have made this point to me. Marx clearly hoped that it would occur in Germany. Thankfully for all of us, it did not.
We ought to reflect where the idea of European monetary union originated. The more idealistic souls among us seem to suppose that European monetary union was the brainchild of that nice M. Jean Monnet. In fact, it was the brainchild of the rather less nice Herr Walther Funk.

The First Deputy Chairman: Order. The hon. Gentleman is making an excellent speech, but he is straying from the subject of the debate. [SEVERAL HON. MEMBERS: "No."] Order. The Chair says that the hon. Gentleman is straying.

Sir Peter Tapsell: I shall come straight back to order, Mr. Lofthouse.

The First Deputy Chairman: I shall be very grateful.

Sir Peter Tapsell: Herr Walther Funk was the president of the Reichsbank, the predecessor of the Bundesbank, from 1939 to 1945. My point is that Funk originated the whole concept of European monetary union, which is what we are debating. Surely, therefore, I am very much in order.
European monetary union was not dreamed up by M. Jean Monnet, an idealistic European; the idea was floated in July 1940 by Walther Funk, who was a drunken, homosexual Nazi toady and was subsequently sentenced to life imprisonment by the Nuremberg tribunal. In July 1940, just after the German panzer divisions had overrun western Europe, Funk circulated a number of documents on European monetary union. These are all set out in the recently published excellent book "The History of the Bundesbank" by the distinguished financial journalist


David Marsh. I shall not quote at length, but I have to say that the wording of the Maastricht treaty in certain sections follows almost word for word the documents circulated inside the Reichsbank in 1940. The view, which Hitler strongly shared, was that Europe could not be held permanently subordinate to Germany by force of arms alone, that it was necessary to resort to economic and monetary forces to make the domination permanent.
7.15 pm
Mr. David Marsh, at pages 132–3 of his book, says:
As the Wehrmacht rampaged across Europe, the success of the blitzkreig convinced the Reichsbank, like many others, that the fighting would soon be over. The central bank and the Reich economics Ministry, under Goering, actively laid plans for post-war monetary union across a large part of Europe with the Reich mark as the dominant currency. In June 1940 the Reichsbank economics and statistics department prepared a detailed analysis for Funk and the rest of the directorate, looking ahead to problems for external monetary policy after the end of the war…
In fact, by July 1940, the Reich economics Ministry had already drawn up detailed plans for a bank of European settlements, to be called the Bank of Europe, as the pivot of the planned post-war monetary system. Countries eligible for participation in the proposed central European economic union included the Netherlands, Denmark, Slovakia, Romania, Bulgaria and Hungary. The Reich economics Ministry suggested that Belgium, Norway and Sweden could also become associated. Special arrangements would have to be made in a future peace treaty with Britain and France in order to secure the economic recovery of central Europe.

Sir Ivan Lawrence: The opt-out.

Sir Peter Tapsell: Exactly.
David Marsh's book continues:
Initial plans were thus based on individual countries' maintaining their own currencies but agreeing to permanently fixed exchange rates against the Reichsmark.
That is the ERM. It has all happened before.
I should like now to turn to the question of who first established an independent and unaccountable central bank. It was not, as many people think, Bismarck in 1870. On the contrary, Bismarck took the view that bankers should not be entrusted with political power, that they would always produce mass unemployment. He made sure, when he set up the Reichsbank in 1870, that it was totally subject to political control—not very democratic political control, but his control.
In 1923—just after Germany, for the first time ever, became a democracy in the shape of the Weimar republic—a gentleman called Dr. Schacht decided that it would not be a good thing for the Reichsbank to be subject to democratically elected politicians. He managed to persuade the Weimar republic in 1923 to set up an independent and unaccountable Reichsbank—the predecessor of the Bundesbank.
Of course, some of our fellow countrymen share Dr. Schacht's distrust of elected politicians. I am afraid that there are many such people in the City of London and in the boardrooms of British industry, as the Chancellor of the Exchequer will discover when he looks for a commercial job. Many people do not admire politicians. It is worth recalling that, when Hitler was elected to power in 1933, the already independent and unaccountable Reichsbank, far from proving a bulwark against irresponsible political adventurism—one of the arguments is that unaccountability and independence provide a

barrier against political adventurism—immediately became, under Dr. Schacht's presidency, a slavish and most helpful tool of Nazi tyranny.

Mr. Stephen Milligan: My hon. Friend's account of the origins of European monetary union is most entertaining, but it is, surely, completely inaccurate. The first European monetary union, which was not a theory, but happened and went beyond Europe, was the creation of the gold standard.

Sir Peter Tapsell: That was not confined to Europe. The gold standard had one great merit: sterling was the anchor currency. If one's currency happens to be the anchor currency, marvellous ideas for monetary union based upon it become quite attractive. The sterling area was attractive when we were the anchor currency; the Bretton Wood agreement was attractive to the United States while the dollar was the anchor currency—although President Nixon left the agreement pretty smartly in 1971 when he found that the dollar was no longer the anchor currency. We would not be the anchor currency in a European monetary union: the Bundesbank and the German mark would provide the anchor currency. Our interests would be subordinated to German interests, as they were while we were members of the exchange rate mechanism.

Mr. Butterfill: My hon. Friend said that the German mark would be the anchor currency if there were monetary union. But under the proposals in the treaty, the German mark would fall. If it no longer existed as a currency, how could it become the anchor currency?

Sir Peter Tapsell: As I said earlier, if we had a single currency, whether we called it the ecu or anything else, it would be the deutschmark under a different name, because Germany is the dominant economy. It is precisely because people admire the way in which the Bundesbank has run its monetary affairs in recent years that they want a European central bank. They think that that bank will be modelled on, and undoubtedly dominated by, the Bundesbank.
The Reichsbank was unaccountable and showed no independence. It did not seek to emulate the Fed in the United States of America, which caused so much trouble to Franklin D. Roosevelt in his first years. By contrast, the Reichsbank overnight became Hitler's creature and provided him with the sinews of war.
People should not be under the illusion that an unaccountable central bank will show a degree of political independence, integrity and liberalism when faced with ruthless and corrupt politicians. History does not suggest that. Far from being a source of weakness to great institutions, their accountability to democratically elected bodies elsewhere is ultimately an essential source of strength to those institutions and those who lead them. Under the Maastricht treaty, no effective accountability will exist—or could exist—as the Financial Secretary recognised in his reply to me on 14 January, which I have already quoted.
Until now, I have made largely economic and banking comments, but I shall now draw some political conclusions. With the loss of ultimate parliamentary control over the central bank, the House will lose the rock on which it was founded and built: control over the money supply. Our constituents will effectively be disfranchised. Those hon. Members who vote for article 107, and its


related articles and protocols, will effectively be echoing Cromwell's words when he pointed at the Mace and said, "Take that bauble away."
When I first entered the House, 34 years ago, there were still a considerable number of hon. Members, particularly Conservative Members, who had sat in the Chamber throughout all the debates on Neville Chamberlain's appeasement policies. I never spoke to one such Member who could recall in his heart ever having been a supporter of those policies. I sometimes used to wonder whether the Munich agreement had been carried single-handed by Neville Chamberlain and the Conservative Whips Office.
Before I entered the House, when I was personal assistant to Anthony Eden, the then Prime Minister, Walter Elliot—a distinguished Member of the House who had been here in the 1930s and who voted for the Munich agreement—told me in a private conversation, which I feel able to repeat as he has been dead for many years, that he voted in favour of Munich out of a sense of personal loyalty to Neville Chamberlain. He said that he admired Chamberlain as a man, and felt that he had done a good job domestically. Walter Elliot said that voting for Munich had not only eventually wrecked his own political career but, more importantly, had damaged his self-esteem. He said that he had never ceased to reproach himself for that vote as events unfolded.
I ask my younger hon. Friends, who have not been long in the House, have long careers ahead of them and know in their hearts that the Maastricht treaty is not right for Britain, to remember Walter Elliot. I predict that, 10 years from now, there will be very few Tory Members of Parliament who will easily recall that they were ever supporters of the Maastricht treaty.

Mr. Benn: We have listened to a speech of exceptional interest from an hon. Gentleman who knows the banking world very well. The account of the hon. Member for East Lindsey (Sir P. Tapsell) of the history of banking, and the relationship of the Bundesbank and the Fed to their Governments, and of the Bank of England to the British Government, merits an enormous amount of study.
I wish that the press were not honouring our debates by their absence. But the newspapers are part of the Greek chorus to which the hon. Gentleman referred at the end of his speech. It is generally assumed by everyone that the Maastricht treaty will be passed, so our debates are a complete waste of time. I find myself in a weird position, as my Front-Bench colleagues are passionately pro-Maastricht. All that has ever been attempted by the Opposition are little procedural tricks to embarrass the Government on a closure motion or something of that sort. We hear no criticism of substance from the Labour Front-Bench team of the Maastricht treaty.
People outside the House are not foolish and they know what is going on. They know of the great cheering when we succeed in voting to go home at 10 pm—but our activities have no substantive effect. The Conservative and Liberal Front Benches are together on the treaty and those of us who hold a different view are publicly presented as a little group of old-fashioned fuddy-duddies who would like to live in the past.
The reality is that the central bank is at the core of the political question that we are discussing. We are not really discussing economics, although I appreciate that that issue

has considerable implications. We are discussing where political power will rest, because the bank will have the ultimate right to determine the shape of the budget, which determines the amount of public expenditure allowed.
Nobody has mentioned the fact that the central bank will wipe out the social chapter. If a Labour Government who favoured the social chapter were elected and wanted to spend more money—they might even wish to adopt the social chapter—the central bank would say no. It would say that, if to do so meant borrowing more than 3 per cent. of the gross national product, the Government would not be allowed to do it—there is a self-cancelling element.
The role of 3 per cent. is an interesting one. I recall the publication of the Beveridge report when I was a student about 50 years ago. It set 3 per cent. as the maximum tolerable level of unemployment. We are now moving towards monetarist days when 3 per cent. is to be the maximum public borrowing, which will condemn us to high unemployment levels for ever.
The importance of the debate is that all the Front Bench teams agree. All the parties represented in the House are abandoning their separate traditions. I cannot speak with authority on the basis of Conservative thinking over the years, nor would I wish to do so. My understanding was that it was about a Britain strong and free. That was the title of a Conservative election manifesto which I have a home in my archives. It shows a picture of a great lion in Trafalgar square and it has the slogan "Britain strong and free". It is a Britain weak and governed by a central bank which is on the agenda now.
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Hon. Members may persuade the electorate or the BBC or John Birt by some special financial arrangement that it is about something else, but they should not try to kid people who have been here long enough to know otherwise. If the Chancellor of the Exchequer were committing an offence if he tried to influence the central bank, which is what the treaty says, how can that possibly be the maintenance of an independent nation?
I am not a nationalist. My history does not lead me to the view that a strong pound and, as somebody said about nuclear weapons, the best-defended dole queues in the world, are the main national duties. However, I have interpreted the Conservative party to take that view and it has been completely undermined by Maastricht.
The Liberal party used to believe in free trade: that is what it was all about. My father was elected as a Liberal Member of Parliament in 1906, but sensibly joined the Labour party in the 1920s just after I was born. It took me a year or two to persuade him to make the transfer and he joined the Labour party in 1927. Now the Liberal party is voting for the most highly protected arrangement one could imagine. It has abandoned its faith.
I now come to my own party. However difficult it is for me to do so, I share the view of the hon. Member for East Lindsey about the importance of history, because, if we do not know where we have come from, we do not know where we are and are therefore not quite sure where to go. My reading of what I would call the progressive political tradition in Britain is that it was the ordinary common people who had no vote but wanted one so that they could use it to influence the conditions of life under which they lived. Through the ballot box they could elect a Government who would at least act as a countervailing power to the power of the landowners and capital.
That has been wholly and completely abandoned by the Front Bench spokesman of my party. It is not that socialism has been abandoned, because that went years ago. My hon. Friend the Member for Blackburn (Mr. Straw) says that we should abandon clause 4. I am waiting for him to say that the archbishop should abandon the 10 commandments on the ground that adultery is so widespread that one could not hope to build a Church on the basis of excluding it.
However, that is not the issue. The issue is that, 100 years ago, when Keir Hardie was elected to Parliament, the principle upon which he built his support was that it was possible for people who did not own banks or have personal wealth to band together into trade unions and promote a party that would use the ballot box to contain, control and redirect the power of capital.

Mr. Forman: Will the right hon. Gentleman give way?

Mr. Benn: Perhaps the hon. Gentleman would allow me to finish. I am trying to develop a theoretical argument that needs to be considered and I hope that I am not being provocative. Labour's Front-Bench Members are abandoning their belief in democracy.

Mr. Peter Mandelson: Will my right hon. Friend give way?

Mr. Benn: No, I intend to develop this point. My hon. Friend will have plenty of opportunities for sound bites. I am putting an argument.

Mr. Mandelson: My right hon. Friend has referred to me. Will he give way?

Mr. Benn: No, I shall not give way.
I am putting a serious argument which I feel deeply. It is that the ballot box is important because it does what I have described in many ways. When a Liberal Government repealed the Taff Vale judgment and allowed trade unions to play a role that the previous Conservative Government had prohibited, they were legislating for a countervailing power against capital. That was greatly to their credit. In many respects the Liberal Government of 1906 were far more progressive than my party today because they carried through much more radical taxation changes and legislated for public ownership of the London docks.
People may agree or disagree with what has been done during this century, but its history shows that trade unionism with a political voice gave people power over their economy which they did not have when they did not have the vote. That was why people wanted the vote. The chartists and the suffragettes were not trying to obtain an A-level in English history or English government. Women wanted power so that Parliament would have to listen and pay attention to women's interests, and those interests were reflected in a minimum wage, in Sunday shopping regulations and in other ways. I fear that that is what my party has abandoned.

Mr. Betts: Will my right hon. Friend give way?

Mr. Benn: My hon. Friend who is trying to intervene asked what hope Britain had of dealing with unemployment. He said it with deep pessimism. My complaint is not that there is a viciousness in Labour Front-Bench Members, but that there is a deep and absolutely unnecessary pessimism. I am on the national executive of

the party and I am not trying to be controversial but simply putting a point of view. The party of which I am a member now believes that nothing at all can be done about unemployment because of the power of international capital. I dispute that, because, if it is difficult now, it was difficult for Keir Hardie.

Mr. Andrew Smith: My right hon. Friend has described the history of democratic socialism as the attempt by people to gain control of the economic forces that shape their lives. Now that capital and the economic system are clearly organised on a European basis, does not that mean that if we are to exercise democratic power in the interests of working people we must do it in conjunction with our European neighbours? As our conference resolutions and policies make clear, the European Community and the Maastricht treaty are the best available means to do that.

Mr. Benn: That is the core of the argument. In its manifesto last March the Labour party endorsed the Maastricht treaty even though it had not been negotiated at the time of the previous conference. There was no conference legitimacy for the manifesto. I said in Chesterfield that I was opposed to it. We are not arguing about nationalism versus internationalism: we are on a wholly different issue. International capital is not controlled by handing it over to the archbishop and bishops of international capital—the independent central bankers.
Listening to my hon. Friends on the Front Bench and my other passionate, modernising colleagues is like listening to the maharajahs at the time of the Raj in India who said, "Look, Queen Victoria is here. You must live with her and you will have more influence if you pick up a knighthood from Buckingham palace and go to the coronation than if you follow this silly Nehru-Gandhi stunt of trying to run our own land."

Mr. Betts: I am still trying to discover my right hon. Friend's realistic alternative in the current situation. He seems to be arguing that we should not be pursuing economic and monetary union as described in the treaty and that we should opt out of our arrangements with the Community. He seems to say that the alternative is simply to retain parliamentary sovereignty and ignore our arrangements with our colleague countries in the Community and that by doing so we can deliver for our people full employment and all the other benefits that he and I want to see. Are those realistic alternatives?

Mr. Benn: My hon. Friend with his clarity of mind has confirmed his pessimism. He had distinguished service on Sheffield city council and honestly believes that Sheffield can do nothing within the context of Britain and that Britain can do nothing outside the context of the Maastricht arrangement. No one should think that Maastricht will liberate us from world market forces because the ecu could go up and down according to the gambling that might occur with the yen and the dollar. I challenge my hon. Friend's pessimism.
If I accepted it I would never stand for Parliament again because I would have to go to the people of Chesterfield, as I shall have to do if this goes through, and say, "You can vote for whoever you like, but I must tell you honestly and frankly that if you vote for me I cannot do a thing


about improving the prospects here because my party has agreed to hand over all the powers not to Parliament but to an independent European bank."

Mr. Forman: The right hon. Gentleman's essential thesis seems to be that power in the modern world emerges, as at the time of Keir Hardie, from the vaults of a bank. In this case, he talks about the power of a possible European central bank. The right hon. Gentleman argues that countervailing political power is needed to lean against that. Does he not realise the impeccable logic of the French case, which is that a political counterbalance is needed against the emerging system of a European central bank and that that should be achieved within the framework of the arrangements proposed by the French to bind the Germans and everyone else?

Mr. Benn: The French socialist party has destroyed itself by following the policy advocated by members of my Front Bench. It has absolutely obliterated itself—although temporarily, not in the longer term.
I was at first against the European Community and wrote an article in Encounter to that effect in 1964. Then, some of the pessimism that I described today overcame me in the 1964 Labour Government. I thought, "This is the way to deal with multinational capital," and favoured our application. Later, I served in the Community, as a member of the Council of Ministers. I came to realise that the European Community is the instrument of multinational capital, to ensure that there is no democratic challenge to the power of international capital. Those who live under the illusion that Brussels and the bankers are our friends against multinational and international financiers are living in a complete dream world.
This may be controversial, but I am bound to say that, for the moment, many of my hon. Friends think that capital should be free to move wherever it likes. They agree that labour should be constrained. Consider the control over labour that exists in Britain compared with the freedom of capital.
This might not appeal to Conservative Members—or they may like it. Paul Johnson has an article in The Daily Mail today saying that the police and the Government have enough firepower to gun down Scargill, Bickerstaffe, and so on, if there is trouble on 2 April. Compare the £10 billion made by speculators on the day that we left the ERM with the fines and sequestration imposed on trade unions if they interfere with production for one day without balloting. That is something that my hon. Friends endorse, too, because it is part of the system that labour should be constrained and capital liberated. Then we tell the populace, "Don't worry—Brussels is the means by which we can control international capital." That is not at all true.
I am trying to chronicle as best I can the nature of the decision that I fear that the House will take. I favoured a referendum in 1968 and still do. The Labour party was not very keen. I was in a minority of one on its national executive and shadow Cabinet, but Wilson came round in the end and we had a referendum. I dare say that, in one way or another, the Conservative party will come around to a referendum, too. But members of my Front Bench are also opposed to a referendum. They do not want the people to have a say. They are absolutely solid in joining

the Government in denying the people the right to have the sort of fascinating, important, historic and fundamental debate that we are allowed tonight.
If the House voted by secret ballot on the Maastricht treaty, it would be defeated, because it would not be known to whom to deny a peerage, put on the Front Bench, allow to attend royal garden parties at Buckingham palace, or reward by the corrupt patronage system—even as revamped by the Prime Minister.

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes): Order. How does that relate to the amendment under consideration?

Mr. Benn: I will say, as a right hon. or hon. Member always does when called to order, that that was a very helpful point to make, Dame Janet.
This huge issue wipes out centuries of Conservative and Labour tradition—the Conservatives defending the national interests of the nation—I am not a nationalist—and Labour defining the power of the ballot box to change our destiny.
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The consequence will be riot. As I suppose that we will lose the vote on Third Reading, I will prepare myself for the next stage. All that will happen is that I shall be catapulted back 100 years, to a Parliament that is not democratic and a time in which women do not have the vote. How does one live in a 19th-century Parliament, in an era when riot is used to change the law? French farmers and French fishermen are rioting already and some British fishermen are beginning to get the message that, if they want to catch the really big fish in the form of the Cabinet, they had better riot. That will happen because people will not accept unjust laws.
If I cannot influence the outcome of the vote on Third Reading—and I am realistic enough to accept that I cannot—I am determined to leave in Hansard an explanation of what happened and why. Pessimism, defeatism, and the failure to represent the people whom we were elected to serve is what happened. If I were not such a moderate man, I would call it a massive betrayal by Parliament of the people who put us here, but I do not know that I want to use the word "betrayal", because it is more a collapse of our self-confidence.
How is history to be made other than by people who have confidence in their own society and institutions and in their capacity to advance them? The so-called modernisers in the Labour party are taking us back to Victorian England. They are not modernisers but Victorian liberals. They believe in market forces and the Manchester school of economics. They do not like the unions very much. They do not believe in socialism. They want the ins and outs of the Tory-Liberal game of the 19th century—well before the Labour party was founded. That cannot be done, because the circumstances of our time will not allow it.
We have chronic mass unemployment and chronic mass youth unemployment, and people will not accept that. I do not know when the expression of anger will come. It may come on 2 April, with unexpected events. Something quite surprising could trigger it off—but if, when that anger comes, it cannot effectively be represented through the Labour party in Parliament, people will find other ways of expressing it. I fear that because I believe in this place. I may be an idealist even to believe in Parliament, but when


I was elected I was told that the great thing about Parliament was that it controlled the purse and the sword. That was the great 17th-century gain, but today we do not control the purse.

Sir Terence Higgins: The right hon. Gentleman spoke of lack of confidence in ourselves. Is not there some inconsistency in his argument in respect of a referendum? Would not a referendum be the ultimate proof of lack of confidence in this place?

The Second Deputy Chairman: Before the right hon. Gentleman continues, I remind him that the amendments under consideration concern banking. The right hon. Gentleman is, in effect, making a Second Reading speech, if not one that goes wider.

Mr. Benn: If banking lies at the heart of the treaty—as it does—you, Dame Janet, will forgive me for drawing attention to its importance.
The Prime Minister supports Boris Yeltsin's referendum, but not a referendum for us. There must be some logic. These big questions are not being considered under parliamentary democracy but are being dealt with under the discipline of the Whips on both sides of the Committee, using all sorts of weapons at their disposal. These questions are not being decided on a free vote of Parliament. At my age that does not affect me, because I do not want anything. They cannot do much to me if I want to speak my mind—but it is disrespectful to the people who put us here to take away the power they lent us and to give it to bankers whom they cannot remove. That is the argument in a nutshell.
I hope that the public have the chance of reading something of the speech of the hon. Member for East Lindsey and of this debate, to understand the enormity of what is being done here and the unanimous betrayal of all the traditions of the three parties by following this route.

Mr. Butterfill: I have the somewhat unenviable task of following two extraordinarily eloquent speakers—the right hon. Member for Chesterfield (Mr. Benn), who is probably the most eloquent and entertaining speaker left in the House, and my hon. Friend the Member for East Lindsey (Sir P. Tapsell), whose expertise in banking matters is probably unrivalled in the House of Commons. The position in which I find myself is especially unenviable, for I disagree with much of what both of them have said.
I am grateful to my hon. Friend the Member for East Lindsey for explaining in such detail the constraints, and the checks and balances that exist in regard to the Bundesbank and the Federal Reserve Board. My hon. Friend carefully explained that the Federal Reserve Board is accountable to Congress. He also pointed out that it did not control the bank's day-to-day monetary decisions. That was an important clarification, but—perhaps even more importantly—he made it clear that even the Federal Reserve Board, with its renowned independence of view, was subject to pressure from the executive: not from Congress, but from the presidency. That, surely, is rather extraordinary. No one suggests that the President has any authority over the bank, and, indeed, it is not accountable to the executive; it is accountable to Congress.

Sir Peter Tapsell: First, I said that the Federal Reserve Board was subject to pressure from both Congress and the

President. Secondly, given that the President appoints the board's governors when vacancies occur, he cannot be sand to have no influence.

Mr. Butterfill: I am grateful for my hon. Friend's helpful intervention. I was not suggesting that the President had no influence; I was suggesting that the board was not accountable to him. Of course, influence is exerted in all these matters—and whoever appoints a central banker, under whatever system, will naturally have influence as a result of his power to appoint. However, it was the accountability point that my hon. Friend was addressing.
Similarly, my hon. Friend explained the independence of the Bundesbank and the element of accountability in that system, but went on to concede that, in the face of the political realities dictated by the unification of Germany, the political will of the people eventually prevailed over the wishes of the Bundesbank, which was forced reluctantly to allow a one-for-one parity between the deutschmark and the ostmark—for which the German people and, indeed, the rest of Europe have subsequently had to pay a considerable price.

Sir Peter Tapsell: I was trying to make the point that the Bundesbank is specifically excluded from interfering with the exchange rate. Chancellor Kohl was entirely within his constitutional rights in making his decision about the parity between the ostmark and the deutschmark. President Pöhl could only give his advice in private: the Bundesbank has no constitutional control over the exchange rate.

Mr. Butterfill: Again, I am grateful to my hon. Friend. He will know that the subsequent conduct of monetary policy has been the subject of considerable tension between the Government and the Bundesbank, and that great pressure has been put on the bank, to some of which it has yielded. My hon. Friend's suggestion that independent central banks cannot be politically accountable is not borne out by the facts. Clearly, whatever system is set up to try to give such banks independence, they will all ultimately be susceptible to political pressures from whichever political institution happens to be in place. I believe that the same would apply to a European central bank, although the pressures would come from a different quarter.
Even today, with our new-found freedom conferred by a floating currency, we see in the newspapers questions such as, "Will the Germans reduce their discount rate, and will that enable our Chancellor to reduce our interest rates still further?" It is not true to say that we retain true independence of action; even with that new-found freedom, we are still bound by our relationships with other currencies. Given that Germany is our largest single trading partner, it is clear that we are very much bound up with what happens in Germany, and very much influenced by the power of the deutschmark.

Mr. Christopher Gill: Surely my hon. Friend recalls the events of last summer, when our Government consistently told us that, if we left the exchange rate mechanism, our interest rate must inevitably rise. What happened? The day after black Wednesday, interest rates went down. How can my hon. Friend possibly maintain his theory in the light of those real and practical events?

Mr. Ian Taylor: The exchange rate went down as well.

Mr. Butterfill: I was intending to turn shortly to the events referred to by my hon. Friend the Member for Ludlow (Mr. Gill), but I agree with the sedentary observation made by my hon. Friend the Member for Esher (Mr. Taylor).

Sir Teddy Taylor: What was wrong with that?

Mr. Butterfill: I am not suggesting that anything was wrong with it.

Mr. Winnick: Will the hon. Gentleman give way?

Mr. Butterfill: May I answer my hon. Friend the Member for Ludlow first? If I give way too often, I may become rather confused about which question I am answering, and where I have got to in my speech. I shall try not to be waylaid too frequently.
We made a political decision to reduce the exchange rate, and we took a gamble on the effect that that might have on inflation. Given that we were in a considerable recession, that appears to have been a wise decision. My point is that, although our currency is notionally free and floating, we are still influenced by what happens in Germany, and must inevitably continue to be influenced by our trading relations.

Mr. Winnick: No one is suggesting for a moment that we can act in total isolation from other currencies; that has never been part of the argument. Does the hon. Gentleman accept, however, that part of the argument that he and others are advancing about the ratification of the treaty and the European central bank is very similar to the argument of those who were so keen for Britain to join the ERM—which, indeed, was the conventional wisdom of the time? It was said then that we could not act in isolation, that joining was inevitable and that those who opposed it—as I certainly did—were living in the past. Yet our ERM membership was a disaster, which cost a great deal in British manufacturing jobs. It is now recognised that at least part of the reason for our high unemployment rate was our ERM membership. Thank heaven we are now out of it.

Mr. Butterfill: I had hoped to deal with the hon. Gentleman's argument later. He is right to say that the ERM was profoundly damaging to us, as it was constituted when we were part of it. What was damaging about it was that the Germany Government were reluctant to fund the unification costs through taxation—although they briefly tried to introduce a 7·5 per cent. special levy, which proved politically unacceptable. They lost a good many seats in the Lander elections as a result. Under the German system, which imposes on the Bundesbank a statutory duty to prevent inflation, the only alternative to funding that enormous level of expenditure was to increase interest rates. That is what went wrong.

Mr. Austin Mitchell: Will the hon. Gentleman give way?

Mr. Butterfill: I should like to get on, if I may.
I do not think that any of us anticipated the events that would arise out of the unification of Germany. Indeed, I do not think that many hon. Members anticipated the unification itself, still less the strains that it would impose on the economy.

Mr. Mitchell: rose—

Mr. Butterfill: I must develop my argument. I have given way several times. The hon. Gentleman will have the opportunity to make his own speech if he can catch your eye later, Dame Janet.
The statutory duty of the Bundesbank to increase interest rates and to have regard only to what is happening in the German domestic economy caused the strains within the exchange rate mechanism and was the fatal flaw within that mechanism. It produced fundamental instability in a system designed to promote stability. We shall achieve stability only if, within a future exchange rate mechanism, the participating central banks have a duty to support the operation of that mechanism rather than a narrow duty to look after their own national interests. That has not yet been fully recognised, but I believe that it is an essential prerequisite to the successful operation of a mechanism.
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Indeed, the very weakness of the mechanism reveals the need either to have a system of freely floating currencies, which we have now, and which will be influenced by a dominant currency—as my hon. Friend the Member for East Lindsey said, it would be dominated by the deutschmark—or to merge all the currencies into a single currency, which would overcome my hon. Friend's fear.
Under the proposed system, the Bundesbank would represent but one equal vote in the operation of a central bank and would to a large extent be giving up its control of what happens in the European economy. That is recognised in Germany where there is now considerable resistance in many quarters to the very idea of giving up the power that it has through the present operations of the market. It therefore seems that we have a great deal to gain, and certainly nothing to fear from German domination, under the system proposed in the treaty.
Indeed, if we were to move quickly to currency union, we should all gain a great deal more influence over our own affairs than we have at the moment. However, I do not think that that utopia will come about for a considerable time, because the convergence criteria are not likely to be achieved in anything like the forseeable future. I do not agree with the proposal that the price that we should all have to pay should be to have cohesion funds to transfer huge sums of money from the wealthier northern countries of Europe to the supplicants in the south. The suggestion that that would be politically acceptable to the countries of the north is pie in the sky. It does not happen even in federal states such as the United States of America, where there is only a limited transfer from the wealthier to the poorer states.

Mr. Legg: Does my right hon. Friend realise that, when there is an independent European central bank, there will be one interest rate for the whole of Europe? Germany, Italy, Spain and the United Kingdom will have one interest rate. There will be no question of having easier monetary conditions in one part of Europe than in another. Within that system, the only way to mitigate the inequalities and problems that will arise will be through massive transfers of funds across Europe.

Mr. Butterfill: I am very surprised to hear that argument from a Conservative Member. We have seen what has happened under our own regional policy. In the United Kingdom, where, my hon. Friend may be surprised


to know, we have a monetary union, we have tried to deal with the problems of having some poor and some rich regions by pouring money into the poorer ones, which is what the Labour party has advocated for years. The effect has not been to improve the lot of the poorer regions. In fact, the lot of the poorer regions has improved only when they have had the wit to abandon some of the restrictive practices imposed by trade unions, to embrace free markets and to encourage inward investment. It is the encouragement of inward investment into the poorer parts of the Community which will ultimately be their salvation. Therefore, we have nothing to fear from a system that brings a single interest rate, combined with a single currency, throughout the European Community. However, we shall take a considerable time to get there.

Dr. Roger Berry: The previous contribution was extremely interesting. If the hon. Member for Bournemouth, West (Mr. Butterfill) had given way, I would have asked him to consider the scale of transfers within this country and this monetary union. Many of us consider them to be inadequate, but they take place automatically between regions when unemployment is higher in one part of the country than in another. The scale of those transfers is inadequate, but it far exceeds anything planned under the Maastricht treaty as part of the movement to a single currency and to monetary union. I shall say more about that a little later.
The vast majority of amendments in this group, including the modest amendment No. 101 tabled by my hon. Friend the Member for Neath (Mr. Hain) and me, are clearly critical of economic and monetary union, as is amendment No. 36, which I strongly support. One of the interesting features of the Maastricht treaty has been pointed out by the hon. Member for East Lindsey (Sir P. Tapsell). The essence of the treaty is economic and monetary union. About a quarter of the treaty's pages relate to banking arrangements and monetary policies. It is interesting to note that the treaty contains very little reference to other aspects of economic policy but that a quarter of the treaty—its guts and its specific proposals—relate to banking arrangements and monetary policy.
There is little doubt that hon. Members such as myself, who have not yet spoken in the debate, must state whether we are Euro-sceptics or anti-European. For the record, I am not a Euro-sceptic or anti-European. I am strongly pro-European. I am so pro-European that I do not want to support a treaty which will impose monetarism, deflation and unemployment on other members of the European Community, as it would here. There is little doubt that the treaty is a victory for those who believe that economic policy is essentially monetary policy and that the achievement of price stability—zero inflation—is the only worthwhile objective of macro-economic policy.
The view is staggeringly irrelevant, given the enormity of the recession and the unemployment facing the European Community. However, monetary policy as the instrument, and price stability or zero inflation as the objective, seem to be the sum total of economic policy in the treaty. It is a view promoted by bankers, among others, who tell us that it is best to take monetary policy out of democratic control and to put it in their good care.
As for democratic control, I cannot help but remember the enthusiasm that many had for democratising the composition of the Committee of the Regions. It is an advisory body, but it was nevertheless apparently a great

victory for democracy when the Government were told in no uncertain terms that they must appoint to it representatives of local communities. That was a great victory for democracy, and I should like a similar victory for democracy when we come to deal with the European central bank or similar institutions.
As for the the "good care" of bankers, I find it surprising that anyone should be convinced by the argument that we should hand them more powers. I could be wrong, but I thought that bankers had something to do with the third world debt crisis because they pursued ill-informed and exceedingly ill-judged lending policies. I could be wrong, but I thought that they had something to do with the disastrous financial deregulation in the 1980s, which led to a wholly unsustainable credit boom and the debt problems that we now face. I am pretty certain that it is also bankers who, with some others, get into hysterics about the extent of public sector borrowing, yet enjoy every little bit of interest that they can get from the much more serious problem of private sector debt. Private sector debt is okay, because bankers do all right out of it.
In fairness, I must add that my opposition to the European system of central bank proposals in the Maastricht treaty is based, not simply on the fact that the bankers support them, but on my genuine belief that economic and monetary union will have the biggest impact of any of the proposals in the treaty, and will inflict serious damage on the economies of Europe.
The proposals are also exceedingly outdated. I find it strange that some people present them as modern when they are based on ideas that became fashionable in certain quarters in the 1980s. It is true that the Delors report was not the first document to promote monetary union within Europe but, if I may be forgiven for not going as far back as some other hon. Members have done, I remind the Committee that in the 1980s, both before and during the debates on the Delors report, the orthodoxy was that we should go for an independent monetary policy aimed exclusively at price stability. That is an old-fashioned idea, extremely inappropriate for Europe in the 1990s, let alone beyond.
My opposition to that part of the treaty is based on the fact that the proposals are confused, monetarist, deflationary and undemocratic. I shall say a few brief words about each of those characteristics, starting with the confusion. It is true that other treaties have confused institutional arrangements for arriving at economic policy with the policy itself. Many treaties, including the treaty of Rome, could be said to have done that. But in the Maastricht treaty there is a hopeless confusion between the institutional framework for setting monetary and fiscal policy—the European system of central banks, the European Monetary Institute, the European central bank, and so forth—and a particular approach to monetary and fiscal policy—the policy to be pursued by the central bank, the convergence conditions, and so forth.
If we wish to establish a set of institutional arrangements for the conduct of economic policy in Europe, they should be robust enough to accommodate policy change. But in Maastricht, we have a mixture, a mess and a confusion between a set of institutions designed to arrive at an economic policy, and a particular economic policy. There has been an accommodation between the Euro-federalists, who have got the kind of institutions they quite fancied, and the monetarists, who have got the economic policy that they wanted.
Such confusion is hopeless when it comes to making treaties. Institutions should be able to accommodate changes in policy—unless, of course, the purpose was that we should never change our economic policy. Perhaps the idea was that we would agree the treaty and that would be the end of policy making. In policy terms, that is alarming, because Maastricht reflects an obsession with inflation and—more importantly—an indifference to unemployment that were inappropriate even in the 1980s, and are grotesque in the 1990s.
The objective of the European system of central banks has not been referred to in the debate, although it has been referred to previously. It is essential to repeat it in order to understand the concerns behind the amendments. Article 105 clearly sets out that objective:
The primary objective of the ESCB shall be to maintain price stability.
Price stability means zero inflation. Of course the European central banks should support the general economic policies set out in article 2—we have heard that often enough—but those policies are not seriously referred to anywhere else in the treaty, so they will not cause too much of a problem. Article 105 says that the ESCB should refer to the general policies in article 2, but that it should do so
Without prejudice to the objective of price stability".
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The objective is clear. We have an independent central bank which is to be established with the legal requirement that its overriding objective should be zero inflation. None of that is accidental. The intellectual roots of the programme are monetarist—the Delors report and before. The pathological obsession with budget deficits and the money supply that is evident throughout Maastricht is based on two monetarist dogmas. The first is that the proper control of the money supply will eliminate inflation, and that that can happen without any harmful effects on unemployment, growth or the real economy.
The second crucial monetarist dogma is that unemployment and growth are determined entirely by supply side conditions, so demand management can be relegated as if it had no importance, or at least only secondary importance. That is not only nonsense but dangerous nonsense. It is why price stability is the overriding objective for the European central bank, and why we are to have an independent central bank with the constitutional requirement to pursue price stability at all costs.
The monetarism is self-evident, and it should be a cause for concern not only among the Opposition. Even the Government no longer accept monetarism—

Mr. Stuart Randall: Will my hon. Friend give way?

Dr. Berry: I shall finish my point, and then give way.
The Chancellor of the Exchequer is desperate to use monetary policy to engineer a consumer-led boom, desperate to use interest rates to encourage consumers to spend more so as to steer the economy out of recession. He no longer believes that zero inflation is a sensible objective, nor does his practice suggest that he still believes that monetary policy should be handed over to somebody else.

Mr. Randall: I have listened carefully to what my hon. Friend has said about maintaining price stability, but I am worried about the way in which he has written off article 2 by saying that it has been mentioned only once and that it therefore loses its validity. I am sure that that is not terribly logical.

Dr. Berry: I am not conscious of having said that article 2 had been mentioned only once; it has been mentioned many times in the debate. Article 2 is made much of in connection with the European central bank in an attempt to support the proposition that such a bank would be about more than aiming at zero inflation—a rather stupid objective—because the article refers to employment, growth and so on. But although article 2 mentions employment and growth, the rest of the treaty does not. The treaty places on the European central bank and the other monetary institutions the requirement to pursue zero inflation, but there is no corresponding obligation to pursue policies that deal with the real economy. That is the relevance of what I was saying.

Mr. Shore: We have heard a lot about article 2, and it is nonsense to give it the elevated importance afforded it by my hon. Friend the Member for Kingston upon Hull, West (Mr. Randall). If the other parts of that article, including the commitment to a high level of employment, were basic to the treaty, there would be a protocol on the subject, and all kinds of elaboration—measures to be taken and commitments made. There are no such commitments, and that is why the balance of what my hon. Friend the Member for Kingston upon Hull, West said to my hon. Friend the Member for Kingswood (Dr. Berry) is wrong.

Dr. Berry: I agree with my right hon. Friend. If one accepts the monetarist position, one can have no objection to those provisions in the Maastricht treaty. Of course one could have no objection to aiming for price stability, because one would believe that it did not affect unemployment or growth. One could not object to setting up an independent central bank beyond anyone else's control, with the specific requirement to achieve price stability, because that would not affect the real economy, so there would be no problem.
To a hard-line monetarist, there is, of course, no difficulty with the proposals, but unfortunately for those who support the Maastricht treaty, no one believes that nonsense any longer—not even the present Government. As has already been said, in a few years' time, our debates may well be judged to have been about a set of proposals that were so unsustainable politically, so unrealistic and so devoid of any recognition of how the real economy works that they will never be implemented. Unfortunately, however, they are the proposals that we have an obligation to debate today.
The monetarist agenda is deflationary, simply because any fool can get zero inflation by hammering the real economy, pushing up unemployment, restraining growth and creating recession. It has been done many times and no doubt it will happen again if certain people have their way. Maastricht is deflationary in other respects, too.
I shall not refer—because it would be out of order, Dame Janet—to the convergence criteria in stages 2 and 3, to which we shall return later, but the whole question of a single currency and monetary union is worthy of attention. I recognise that a single currency has benefits.

Mr. Radice: Good.

Dr. Berry: I recognise that—and not for the first time, as my hon. Friend the Member for Durham, North (Mr. Radice) knows. Any fool who did not recognise that there were some benefits in monetary union would have difficulty in explaining why we have a single currency in this country. We have a single currency because there are benefits. Equally, though, we do not have one currency throughout the world because there are certain disbenefits. Any sensible economic argument about the optimal area for a single currency must address advantages and disadvantages.
I say to my sedentary hon. Friend the Member for Durham, North that I of course recognise the advantages of a single currency. It is true that there may be efficiency gains to be had from the elimination of the costs of exchanging currencies or from the elimination of risk due to exchange rate uncertainty. I concede that. I recognise that a third of what our economy produces is exported and that 60 per cent. of our trade is with the other members of the European Community. Although it is possible to exaggerate those efficiency gains, I recognise that they exist. I also recognise that a single currency would reduce speculation by the simple device of removing some other currencies against which people could speculate, and that there could be virtues—least for Labour Governments—in such a situation.
There are costs as well, however, and they are profound. Above all, a single currency imposes restrictions on the instruments of macro-economic policy that we can use. In the context of this debate, a single currency in Europe imposes a restriction on what we can do in terms of exchange rate and monetary policy. I invite any hon. Member who thinks that this line of argument is trivial to imagine how uncomfortable the present Government would feel if they did not have some flexibility in relation to the exchange rate and monetary policy and how some of the Opposition's proposals would sound if exchange rate and monetary policy had already been abandoned.

Mr. Radice: But the Maastricht treaty leaves exchange rate policy in the hands of the Council. It is not governed by the central bank at all.

Dr. Berry: I am trying to work out why my hon. Friend is being so antagonistic. On occasion, I say something with which he agrees—

Mr. Radice: I am trying to be helpful.

Dr. Berry: My hon. Friend has conceded the point that the treaty removes from the national Governments of member states the power to influence exchange rate policy —[Interruption.] I am afraid that it does. One cannot say, "Power is located elsewhere and yet at the same time resides here." It must be one thing or the other.
The cost of a single currency is that the nation states or regions that decide to join in a single currency area give up certain instruments of macro-economic policy: most notably, they have less flexibility on monetary policy and no flexibility in relation to exchange rate policy, for self-evident reasons.
At present, if a country or region in the European Community, as elsewhere, becomes less competitive—no prizes for guessing examples—balance of payments problems emerge and unemployment increases. With monetary union, balance of payments problems will

re-emerge as even greater problems of unemployment. Quite simply, the market adjusts to changing levels of competitiveness by generating higher unemployment in less competitive regions. That must be so. That is how the market operates. We need to think very carefully before we support a single currency arrangement given that we know, as a matter of simple fact—there is no difference between the two sides of the Committee on this—that that is how the market adjusts to differences in competitiveness.
To return to my first point, it is a fact that, within nation state monetary unions such as the United States, Germany and this country—

Mr. Robert Sheldon: Will my hon. Friend give way?

Dr. Berry: Yes, of course—even in the middle of a sentence.

Mr. Sheldon: The point that my hon. Friend is making is well understood. Most of what he said is absolutely right and no one ought to quarrel with it; he has put both sides of the argument. As my hon. Friend says, a union could increase unemployment. On the other hand, one could react by reducing the cost of labour. One of the principal reasons why the Government are so opposed to the social chapter is that it denies them that alternative. They must be against the social chapter because, if we are uncompetitive, such action is the only solution that they have—other than increasing levels of unemployment even further.

Dr. Berry: I agree with my right hon. Friend. That is absolutely correct.
Given that these facts are well known, I shall simply re-state my point. The difference between the proposal for a single currency within the European Community and what exists today in the United States, Germany and the United Kingdom is that, in the case of those three nation states, there are substantial fiscal systems that redistribute resources. There is automatic fiscal redistribution in the United Kingdom, as areas of high unemployment contribute less in tax and receive more in revenue. In Germany, there are formal systems for the redistribution of wealth between the lander.
The Maastricht treaty contains no equivalent way of addressing such imbalances. That is why I argue strongly that it is simply not sensible for member states of the European Community to sacrifice instruments of national macro-economic policy without much larger European Community budget and/or automatic redistributive mechanisms. Maastricht provides neither. It will therefore be profoundly deflationary in the less competitive regions.

Mr. Betts: I accept the point that my hon. Friend makes and agree that additional money within the Community budget and the mechanisms to which he has referred are not specifically mentioned in the Maastricht treaty. Does he not accept, however, that such matters are capable of development within the European Community? There is no restriction in the treaty to prevent them from being developed. Might not that be another way of looking at the situation? Might we not take the view that monetary union can be developed in the context of other measures to stop the problems of unemployment, which I recognise and on which I agree with my hon. Friend?

Dr. Berry: That is a bit like saying that the Budget that we have just debated is capable of being developed to allow us to address mass unemployment in Britain. Of course it is capable of being so developed. The fact that that subject was not dealt with in the Budget was the reason why the Opposition said that it was inadequate to address unemployment and economic recovery. Anything could happen after Maastricht. But there is a treaty before us which contains words and which we must read and understand. Running through the many pages of the treaty dealing with economic matters is the single-minded obsession with the monetarist objective of zero inflation and the monetarist instrument of an independent central bank controlling monetary policy. There is nothing of the kind to which my hon. Friend refers.

Mr. Mandelson: On the subject of obsession, my hon. Friend appears to be overly obsessed by the words and gives insufficient attention to the actions that can be taken by politicians and Governments within the framework of the Maastricht treaty—[Interruption.] It is not good enough for those who disagree with other hon. Members to bawl and shout and attempt to prevent them from speaking. That is an unattractive characteristic of this debate. It shows an obvious weakness of argument among some of my hon. Friends.
My hon. Friend the Member for Kingswood (Dr. Berry) referred to the Budget. Is he aware that it is up to politicians and Ministers to take decisions, to form judgments and to implement policies? What is in the Maastricht treaty that prevents politicians and Ministers from taking such desirable decisions within the economic policy guidelines which are a feature of the treaty and which it is up to politicians to draw up and implement?

Dr. Berry: As my hon. Friend wants chapter and verse, I quote article 107:
When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.

Mr. Mandelson: Well—

Dr. Berry: My hon. Friend will agree that I have not barracked anybody so far. I am attempting to answer his question. If he thinks that that article, explaining how politicians cannot influence the central bank, is inadequate, perhaps he will allow me to summarise my understanding of the provision, and then he can explain why the words mean something different to him. I am not a lawyer; I am a humble hack—

Mr. Legg: And an economist.

Dr. Berry: Yes, I plead guilty to being one of those. On the basis of my knowledge of the English language, article 107 instructs the European central bank and the Bank of England—denationalised by then, under the treaty—not to take instructions from anyone. It also

commits the signatories to the treaty not to seek to influence the European central bank or national central banks.

Mr. Radice: My hon. Friend argues that economic and monetary union is against the interests of the weakest regions. There is in the Maastricht treaty—whether it is adequate is debatable; I do not think it is sufficiently adequate—a mechanism for dealing with that problem. It is called the structural fund and the cohesion fund. If my hon. Friend had mentioned those funds, he might have had a fair point. He is implying that there is no mechanism in the treaty to deal with such problems. There is a mechanism, though it needs to be expanded.

Dr. Berry: Redistribution takes place in the European Community. I thought I had pointed out that its extent was inadequate to justify the unleashing of a single currency on member states. In essence, I do not believe that the degree of economic, social and political cohesion necessary for the benefits of a single currency to outweigh the costs exists in the European Community now. I happily recognise that there are benefits from a single currency, but it is foolish in the extreme simply to assume that the costs in terms of rising unemployment that a single currency would impose now could be addressed through the terms of the Maastricht treaty.
There is also a nonsense in the Maastricht treaty as it tries to separate monetary policy from the rest of economic policy. How is fiscal policy—public expenditure and taxation policy—to be run in such circumstances? It cannot be left to a few simple rules about budget deficits. Limiting the size of public sector deficits does not determine a fiscal framework, because the macroeconomic effects of a budget depend on much more than the size of the deficit. One could have the same deficit for radically different levels of expenditure and taxation. It is rumoured that there are some heretics in this place who might believe that we should have higher levels of expenditure and possibly even higher levels of taxation.
A fiscal policy cannot be determined purely by the size of a budget deficit. Fiscal and monetary policy must be determined together. If one produces a budget, one must discuss how it is to be paid for. It would be ridiculous to have one body—in this case an independent European central bank—setting monetary policy, whatever the objectives, with fiscal policy for Europe being determined somewhere else.
There is logic in the argument that, if there is to be monetary union in the European Community and a single currency, we must have political union as well so that there can be democratic control of economic policy. Maastricht does not set out to do that. It hands over monetary policy to the control of non-elected and unaccountable bankers with the legal requirement that they deflate the European economy, but it says little about how that fits in with other aspects of economic policy in Europe. I cannot see how any democrat could support that.
It seems self-evident that the political, economic and social cohesion necessary for a single currency in the EC does not exist today. Any democrat who was arguing for monetary union now would have to argue for political union as well. That would be the only way to achieve democratic control.
In other words, the options are simple. Either we maintain our separate currencies—and co-ordinate


European policy, so long as that is in favour of reflation and not deflation; we assume that we co-ordinate in the desirable direction, though there is some evidence that we do not always do that—and co-ordinate our economic policies to aim for full employment and economic recovery, or we go for a single currency and European political union. I do not believe that the second is either on offer or is desirable at this stage, so I strongly support the first of the two options.
The middle way that says, "We shall not go for democratic institutions in Europe that will control economic policy at a different level from the present nation state but will, on the other hand, hand over the control of monetary policy to non-elected bankers" is confused, monetarist and undemocratic, and will lead to rising unemployment in Europe and, in so doing—paradoxically, perhaps, in the view of some of those advocating it—will lead to greater division in Europe.
I do not want Europe to be rent asunder by an economic package which will increase unemployment and thereby divide. I want a Europe which addresses full employment. The Maastricht treaty does not do it. I hope that at least one of the amendments in this group—whether it is amendment No. 36, amendment No. 101 or whatever—which effectively undermine the proposals for a single currency, is carried, because otherwise it will be a disaster for not simply the United Kingdom but the other economies in Europe.

Mr. Gill: I shall try to focus the Committee's attention on the effects of creating a European central bank on the people of the United Kingdom, the politicians who represent them and, indeed, the political parties to which we all belong. I apologise for quoting article 107 again, but I shall paraphrase:
neither the ECB, nor a national central bank…shall seek or take instructions…from any government of a Member State".
In other words, we will remove from the House and, therefore, the control of the people of the United Kingdom that essential element which gives them control over their destiny—money. Money is power. Through the ages, people and politicians have recognised that control of money is the control of power. If we cede the control of money to a European central bank by this Bill, we shall have effectively ceded the control which the people in the United Kingdom previously vested in their elected representatives in the House.

Mr. Dennis Skinner: What does the hon. Gentleman think of the idea that one cannot control what one does not own?

Mr. Gill: The hon. Gentleman is absolutely right; I entirely agree. I should like to ask the Financial Secretary how the Government, who do not believe in returning the Bank of England to the private sector, are prepared, by dint of this treaty, to cede control of the whole of the British economy to an unelected and uncontrollable European central bank without first experimenting in the United Kingdom to see whether it can possibly work. It seems to be entirely illogical that we should proceed along those lines without at least experimenting in our own country, especially when we have a Government who are committed to returning most state institutions back to the private sector.
I hope that the Financial Secretary will respond to my question because many of my constituents find it difficult to understand why, when we are privatising commercial undertakings—at present we face the prospect of privatising the railways—we do not consider that it is important to privatise the Bank of England. At the same time, we are saying that they must support a treaty which will remove instruments that I would prefer to vest in the control of the Bank of England to a European central bank where nationals of other countries will control what our monetary policy will be. It follows that those nationals will also be controlling our fiscal policy.
I shall come back to my theme, which is the effect that the transfer of control and power to a European central bank will have on us and the people whom we represent. If we reach the point—which we inevitably will—at which we are not free agents in this House to make those decisions which the electorate expect us to make, it will be a poor day for British politics and British politicians. The effects of removing such powers from the United Kingdom and vesting them abroad is that, at a stroke, one divides the two principles of good management—authority and responsibilty. In any properly managed organisation, those two principles must be vested in the same pair of hands.
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The people of the United Kingdom look to us to be responsible for all that goes on in this country and all that which affects their lives. If we decide that we will put the authority for much of what we must decide beyond our shores to be decided for us, we will create the classic symptoms of bad management. We will have put authority in one pair of hands and vested responsibility in another pair of hands. Anyone who has any experience of management knows that that simply does not work.
Many right hon. and hon. Members appreciate the unsatisfactory nature of having to tell constituents, "I understand your complaint. I sympathise and agree with your complaint, but it is out of my hands. I cannot do anything about it." I submit that the electorate will not put up with that. People will soon become disenchanted, first, shall we say, with the Conservative Government. They might even be tempted to vote for the Opposition party. It will not be long before the Labour party is proved to be in exactly the same powerless situation as that which I have described. In due course, people will conclude that there is no point in voting for any politician or any party. That is a dangerous position in which to put our country. It will mean that people will feel that there is no point in voting for any party and will, therefore, vote for no party.

Mr. Bob Cryer: Does it follow that, if such power is handed to a central bank and if people who are elected to government are able to shrug off any responsibility by saying that it is not their fault or responsibility because the decisions are made by the central bank, and the procedure was approved by Parliament through a treaty, a degree of alienation will develop which will result in people taking action, possibly by violent means, as my right hon. Friend the Member for Chesterfield (Mr. Benn) said, to seek alternative solutions to the real problems of, for example, widespread unemployment which might result from the decisions of a central bank?

Mr. Gill: That is exactly my fear. In extreme circumstances, we will reach the position described by the hon. Gentleman and, indeed, portrayed by the right hon. Member for Chesterfield (Mr. Benn).
The right hon. Member for Chesterfield used an interesting word. He talked about the "confidence" of the nation. I do not have much confidence standing up in the Chamber and delivering a speech, but I have every confidence that my views are absolutely sound. I have not a scintilla of doubt that when I oppose the treaty, and especially when I oppose those new clauses before us tonight, I am doing the right thing because I am in tune with the people whom I represent and the majority of people in the United Kingdom.
Whether or not the majority of the people of Britain are right or wrong on the issue is not the point. If the majority of the people believe that we should not sign the treaty—I believe that that is their view—we should not sign it. If one believes in democracy, one believes that the view of the majority should prevail.
The hon. Member for Bradford, South (Mr. Cryer) said that many politicians and Ministers would find themselves powerless to answer responsibly to the electorate. He may recognise that some right hon. and hon. Members might be content with that position. I do not suggest that the hon. Gentleman would be content with it. I have a different opinion. I believe that he would stand up robustly for the views that he holds—with which, incidentally, I disagree, except on this issue. He would not be afraid to stand up for his views and defend them to the people he represents.
However, sad to say, other hon. Members might be content to shelter behind the European central bank or the Common Market and say to the people, "We have done our best. We would like to do more, but sadly the matter is out of our hands." I agree with the hon. Member for Bradford, South that that would lead to great alienation in our nation. We should not underestimate for one minute the threat to our democracy from proceeding with the establishment of a European central bank.
Of course, the establishment of a European central bank would inevitably lead to a central currency. My hon. Friend the Member for East Lindsey (Sir P. Tapsell) suggested that there would be 12 Chancellors of the Exchequer if we had a single currency. I agreed with much of what he said in his excellent speech, but I disagreed with him on this one detail.
If we had a European central bank and a single currency, there would be but one Chancellor of the Exchequer in Europe and the prospect is that that Chancellor would not reside at No. 11 Downing street. He might not be a Member of this Parliament. There is a great possibility that he would be German. That theme was developed by my hon. Friend the Member for East Lindsey. He forecast that the creation of a central bank and single currency would mean that the deutschmark became the currency of the European Community.

Mr. Cryer: Does the hon. Gentleman accept that some people have the mistaken notion that the Maastricht treaty brings nations together and that we should work towards some conglomerate, as if that was an idealistic aim? Does he agree that where nations are compelled to join together, tensions and antagonisms are created, as we have seen in eastern Europe, following the break-up of the Soviet bloc? An enormous degree of nationalism has developed and

vicious tensions have arisen which have led to enormous tragedies. The idea of forcing nations together instead of nations working together as equals is festooned with doom and potential disaster.

Mr. Gill: I am more than willing to respond to that intervention, but if I do so directly, I risk being ruled out of order by you, Dame Janet. I shall answer the hon. Gentleman's question in the context of the European central bank. He and I talk the same language. I suggest that if 12 Finance Ministers sat round a table trying to decide matters which affected the economic and monetary policy of the European Community, the decision that would emerge from their deliberations would not satisfy him or, indeed, me. Nor would it satisfy the citizens of the 11 other nations which were party to the deliberations.
It is a simple fact that any decision reached by 12 Ministers on future policy would be a compromise. No other country would accept what Britain would like to see imposed any more than Britain would accept what another country would like to see imposed. Already we have so many examples of decisions affecting Britain which have been taken by that process of compromise. Decisions invariably arrive after the event. They are almost invariably late. We do not get decisions when we want them. When they arrive, they are compromises. That is the nature of the beast. They fit where they touch.
The establishment of a central bank would affect the people we represent. Indeed, people will increasingly resent having to accept a compromise decision which they feel in their bones was not the decision that their Members of Parliament in their sovereign Parliament would have reached if they had been in a position to do so. If people feel that they cannot get a satisfactory answer from their elected Members in debates in their own Parliament, they will become disillusioned and disenchanted with the whole body politic. That is very dangerous to our democracy—I stress the words "our democracy".
Our democracy is much older than any of the democracies of the 11 nations which compromise the European Community. Our democracy has evolved. It may not be the perfect democracy, but it suits the British people. The system of democracy that we have built up in this Parliament has been founded on the unions created in the British Isles many centuries ago. It just happens that our system of government suits us in the main. People criticise it—it is not perfect and I do not pretend it is but the system has evolved over many centuries and it suits us now.
Of course, we try to compromise. We keep coming back to that word. Now we are trying to compromise our system of government, which I stress has suited us for many centuries, within another system which also has to accommodate the systems of government that have built up in 11 other nations.

Mr. Radice: The hon. Gentleman was extolling the virtues of British parliamentary democracy. Would he care to comment on the following point? As far as I understand it, we are the only Parliament of the Twelve that does not have the power to ratify treaties.

Mr. Gill: That is an interesting point, but the hon. Gentleman knows what we are debating and why the House gives such great importance to the Bill. He knows that we have taken so many days to debate it simply


because of the importance that we and—I shall not miss the opportunity to say—the people we represent attach to this particular subject.
I was speaking about the union of the United Kingdom. For hundreds of years, we have had a union, or one could say a common market, within the British Isles. We certainly have a single currency. The conclusions that I draw from our history are perhaps different from those expressed by other hon. Members. It is an object lesson for Britain to learn as it shapes up perhaps to partaking in a broader Europe involving a European central bank and a single currency. A single currency has not removed all the frictions, difficulties and tensions in our society.
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What inevitably happened and will continue to happen is that richer regions of the United Kingdom have to divvy up each and every year to make funds available to the poorer regions so that those poorer regions can be sustained within the overall union of the United Kingdom.
Those who believe that our involvement in the European Community will benefit our own regions delude themselves. Britain is already paying some £2 billion net each year to the Community. That money does not return to these shores. Opposition Members might support my view that that money could usefully go to the regions of the United Kingdom, but is more likely in future, through the cohesion fund, to go to Greece, Portugal, Spain and Southern Ireland. That will be the effect of the greater union that we are now creating. Instead of the wealth of the nation being used to support our regional policy, it will be used increasingly to support other economies.
As an example of how the creation of another single currency has worked to the disadvantage of Britain, I instance what has happened in agriculture. Many right hon. and hon. Gentlemen will appreciate that through the common agricultural policy we have effectively created a common currency—the green currency. To some extent, we have created the equivalent of a European monetary system because, through the compensatory allowances, the green currencies can be adjusted so that no country is disadvantaged. The result has not been enormous prosperity in farming or great happiness to farmers, but quite the reverse. The taxpayer, both directly though his taxes and indirectly as a purchaser of agricultural produce, has had to pay a very high price.
I am mindful of a statistic which my hon. Friend the Member for Southend, East (Sir T. Taylor) has quoted before. If Britain simply gave every farmer each year the index-linked equivalent of £127,000, that would represent a saving to the Exchequer compared with what is happening now. Although we spend more than £127,000 per farmer each year, our agriculture is in a parlous state and very few farmers are content with their earnings and the profitability of their businesses.
Here again one sees a single currency effectively at work, but it has not delivered prosperity or easier working in that industry; it has delivered the absolute opposite.
My hon. Friend the Member for Lindsey, East spoke about the possible aspirations of the German people for the deutschmark to become the currency of Europe after the creation of the European central bank and of a single currency. If the Germans were able to achieve their aspirations, it would preclude English people from achieving any of theirs.
That is a feature which many young people in this country recognise today. They are looking askance at this treaty, which we may be in danger of signing, because they see that signing it will remove from them much of the responsibility for their lives and the authority to do something about their lives and their country. They can see responsibility for the future of their country passing from these shores and being vested in the hands of the nationals of other countries. Many young people today, therefore, are totally opposed to the treaty, to the creation of the single market and to the creation of a European central bank because they see the total erosion of any prospect of their controlling the destiny of their country.
Every one of us, within our limitations, aspires to be able to do something for our country. I feel passionately strongly about this country and about the ability of its people to manage their own affairs, control their own destiny and deliver the standard of living and way of life that they want. Young people, in particular, recognise that all the time we cede power from Parliament we are disposing of their future ability to serve their country and their people and to provide for their families in the way that they would like.
In the end, what is important and what we must take seriously in doing whatever we do in the House is to create the circumstances in which the people of this country can see their aspirations achieved. If we cannot do so, we should not be signing the treaty. If we deny the people the achievement of their legitimate aspirations, we risk unleashing forces which it will be difficult to control. Many argue that the treaty is necessary to suppress the forces of nationalism. I take the contrary view. If, by whatever means—the creation of a single currency or the creation of a European central bank—we deny people the opportunity to achieve their natural and legitimate aspirations, we shall encourage in the British Isles more nationalism than is perhaps already there.
The richer regions of this country are continually funding the poorer regions, but that does not buy happiness or peace because never a year goes by without the Scots, Welsh and Irish coming back to the Hous—and they do not come to say, "Thank you, we're grateful," but to say that it was not enough.

Mr. Walter Sweeney: Does my hon. Friend accept that ratification of the treaty would lead to increased nationalistic tendencies and to a sense of the denial of democracy—to a feeling of frustration—which might result in disorder on the streets?

Mr. Gill: I have answered that argument in one way, but I should like the opportunity to do so in another, Dame Janet.

The Second Deputy Chairman: I hope that the hon. Gentleman will do so in a way that relates to the amendments under consideration.

Mr. Gill: I shall do my level best to ensure that I meet those requirements, Dame Janet.
The coinage of the realm is at stake. If it is controlled by the European central bank, and if all the decisions affecting it are seen by the people of this country to be defective, or if they disagree fundamentally or in detail with the decisions of the central bankers, it will be a bad day for this country and for its people and there will be enormous resentment.
If people feel that they cannot get redress through the ballot box, they will be left with no alternative but to seek other measures. I am sure that my hon. Friend the Member for Vale of Glamorgan (Mr. Sweeney) shares my view that that would also be a sad day for this country.
During our debates in Committee, much play has been made of the word "loyalty" and loyalty to party and constituents have been mentioned, but I suggest that there are two other important loyalties—loyalty to oneself and to one's country. I shall vote for the amendment.

Mr. Malcolm Bruce: This will be my first intervention in the Maastricht debate. As the Committee has progressed, I have noticed that the shorter an hon. Member's notes, the longer his speech. I have some notes here, but they are approximately in proportion to the length of the speech that I intend to make.
I have been interested in some of the exchanges of views. One would have thought that the thrust of the argument of those who oppose the amendment is that it is a terrible thing to have an independent bank, and that one needs a bank that is under clear control. Then one would have control of the economy, and problems such as unemployment would be eliminated. That would be a bank similar to the Bank of England, but we have the Bank of England and it is under control, and we also have 3 million unemployed and an appalling balance of payments deficit. That seems to have escaped some of the critics of the developments that the treaty seeks to recommend for this country and for the Community.
I was interested to hear the speech by the right hon. Member for Chesterfield (Mr. Benn), and found it strange to see myself as a rising new Liberal Democrat, hearing the voice of a decaying old socialist, who was quoting Liberal history at me. He seemed to be accusing people of pessimism, but he seemed to be afraid of embracing change and of finding instruments in the mechanism whereby it can be brought about.
The treaty is about trying to take a step forward to build mechanisms, which will have to evolve as the Community has evolved since its inception. It is no secret to the Committee that my party has long argued the case for an independent central bank for the United Kingdom, and not only for the European Community as it develops. I should like to say why we think that an independent central bank is desirable—I stress "independent" rather than "unaccountable".

Mr. Mandelson: The reasons for the hon. Gentleman's party's support for an independent central bank will be of great interest to the Committee. Before giving those reasons, however, will he say whether the independent central bank that he advocates should have absolutely no political relationship with Parliament? Why have his hon. Friends said outside this Chamber that they are not prepared to support amendments tabled by my hon. Friend the Member for Oxford, East (Mr. Smith) to achieve some answerability and accountability? Surely that is completely inconsistent with, and contradictory of, everything that Liberal Democrats stand for.

Mr. Bruce: As I said before I was interrupted, there is a difference between independence and lack of accountability. As has been clearly pointed out, an independent bank is appointed by politicians and operates within a constitutional framework determined by politicians and capable of being amended by politicians.
But I want to answer the hon. Gentleman's question directly. What is not acceptable is the suggestion that the bank should be accountable, in its day-to-day management of the economy, to the Government or to the House of Commons. This point has been addressed by Conservative Members. The problem arising out of the amendment is not whether the bank should report to the House of Commons. Such reporting would present us with no serious problem, but difficulty would arise if reports were put to a vote. The consequences would clearly compromise the principle of the bank's freedom of action and independence. That is why we have reservations about the amendment.
The second point relates to the bank's independence to pursue the strategy set down in its constitution. In general, it has been agreed—although there have been dissenting voices in the debate today—that bearing down on inflation should be the specific responsibility of the bank, and that it should pursue policies designed to achieve that objective. Those who say that that is not the objective that a central bank should freely pursue hold a perfectly legitimate view, but the argument then hinges on changing the articles of the bank and the political framework and constitution within which it operates—if necessary, by changing the treaty. The European Community has developed, step by step, through treaties, and will continue to do so. That is and will continue to be an evolutionary process.

Sir Teddy Taylor: Does the hon. Gentleman accept that, even if the House of Commons, under new clause 1, were to pass a resolution to the effect that the activities of our central bank were a mixture of lunacy, irresponsibility and madness, the decisions of the bank, in terms of the treaty, would not be affected in any way? Would not the bank be acting illegally if it paid the slightest attention to the views of the House of Commons?

Mr. Bruce: What the hon. Gentleman says is true, although I suspect that it might be quite difficult to prove. The argument has already been advanced in the case of the Bundesbank, which is independent and is required, within specific parameters, to operate independently and not to be directed by the German Government. However, there is a sanction. First, appointment is by the Government, and I suppose that in extreme circumstances the Government could dismiss. But the Government cannot tell the bank to change its policies within specific, legally defined areas.
Policies outside those areas are a different matter. This is about setting up mechanisms by which the bank will operate and mechanisms for effecting change from time to time should the need arise. But there should not be interference in day-to-day management. That is the meaning of independence.

Mr. Cash: The hon. Gentleman is displaying incredible ignorance of the nature and functions of the Bundesbank. One thing that is crystal clear is that the German Federal Government are responsible for economic objectives, whereas the Bundesbank merely has a function with


respect to questions of currency stability. Everything that the hon. Gentleman says displays a complete lack of knowledge of how the system functions. I do not understand how his party, whose name includes the words "Liberal Democratic", and which has the tradition of the Liberal party behind it, can endorse a system so thoroughly undemocratic and authoritarian. It is an unbelievable position. The people of this country need to know what a fraud the Liberal Democrats are perpetrating on their own electors.

Mr. Bruce: I shall take that intervention for what it is worth, but I think that the hon. Gentleman might listen to the argument before launching his attack. I shall not make the mistake of giving way to him again.
The first argument that we have made is that the pragmatic evidence is that independent central banks have an extremely good record of bearing down on inflation. There is plenty of evidence, not just theoretical but practical, to show that, when a bank acts independently, the record on reducing inflation is extremely good.
The hon. Member for Stafford (Mr. Cash) comments about the Bundesbank—

Mr. Denzil Davies: Will the hon. Gentleman give way?

Mr. Bruce: I shall not give way, as I wish to develop my argument. It becomes difficult to do so if one is interrupted every sentence.
The evidence shows that independent banks are effective in reducing inflation. A study published in 1991 by Vittorio Grilli expressed that graphically. It said:
Central bank independence is tantamount to free lunch: it delivers low inflation with no apparent costs to the real economy's macroeconomic performance.

Mr. Austin Mitchell: Will the hon. Gentleman give way?

Mr. Bruce: I should like to proceed further with my argument, as I have a number of issues to raise.
I accept that my argument can be seen at present in practical terms only in individual nation states, as that is all we have to base it on. It has been argued that the effectiveness of a bank in bearing down on inflation and resisting political pressures across the whole of Europe would be less apparent. However, it can be argued that, in a single state, a general election can result in political pressures that affect the framework and organisation of the bank. It is unlikely that all 12 member states will face re-election at the same time, which would ensure greater independence than there is in a single member state.
It is also interesting that those who seem to oppose the concept of a bank operating within specific parameters for particular purposes without day-to-day political interference also seem to believe that, where that interference is apparent and overt, as it has been in this country, it automatically works in the national interest and meets the needs of constituents and electors. I have listened with interest, not only in this debate, but in previous debates, to criticisms—particularly from within the Conservative party—about our membership of the exchange rate mechanism, its undesirability and its effect on interest rates.
I remind Conservative Members of the circumstances in which we joined the ERM. There were numerous opportunities over many years for the Government to decide when the mix of exchange rate mechanisms was

right. They missed every one of those opportunities—almost any of which would have been a better moment to enter than that when the Government decided to do so. It was not the Bank of England that decided when to enter, but the Government. They did so on the eve of the Conservative party conference in order to secure a standing ovation the following day.
That was the most short-term policy manipulation, as a result of which we entered the ERM at the wrong rate. The policy was successful in reducing inflation over a period, but at a severe cost. We had to sustain higher exchange rates than we would otherwise have done, because we also had to sustain interest rates.

Mr. Austin Mitchell: The hon. Gentleman said that we entered the ERM at the wrong rate, which is certainly true. But in that case, why was the Liberal party so insistent on pressing us to go into narrower bands at that wrong rate?

Mr. Bruce: The hon. Gentleman should be aware that the point of entering the exchange rate mechanism was to impose a discipline on this country, which would have enabled us to bring down inflation. We are dealing with the short term because it is only six months since we left the ERM.

Mr. Skinner: Would the hon. Gentleman go back into the ERM?

Mr. Bruce: In the present circumstances, we cannot return to it. The Bank of England has expressed the view that we should have a short transition to a single currency rather than go through a long process which leaves each currency vulnerable and open to pressure—[Interruption.] The hon. Member for Bolsover (Mr. Skinner) has moved from his usual place and is hurling sedentary abuse—[Interruption.]

The Second Deputy Chairman: Order. It is quite out of order for an hon. Member to come between the Chair and the Member who is speaking in the way that the hon. Member for Bolsover (Mr. Skinner) has done. Such behaviour is unacceptable.

Mr. Skinner: On a point of order, Madam Chairman. The hon. Gentleman invited me to come back to my seat, and said that I was in an unusual position. I was about to ask him if he was prepared to go back into the ERM along with Paddy Backdown and his mates, because that would be like a dog returning to his vomit.

The Second Deputy Chairman: I have heard enough.

Mr. Bruce: It is probably just as well that the hon. Gentleman's remarks are on the record. They do not do him much credit. The hon. Gentleman and those who hold his view do not have a vision of the future other than a centralised, socialist-managed state which does not yet command wide support in this country. We are trying to build a mechanism in Europe that will make the single market work and develop the Community so that its past successes can be built upon. That is the purpose of the proposals.
We need to look seriously at how we can operate a monetary system with the responsible financial management that an independent bank can provide. A system that is subject to constant political interference is almost bound to fail.

Mr. Michael Spicer: Will the hon. Gentleman give way?

Mr. Bruce: No, I should like to make progress.
I am not convinced by the argument that a central bank is anti-democratic. If we agree that economic policy has to be underpinned by low inflation, we must agree a mechanism by which that can be done and grant to a body the authority to pursue the policies to achieve it. Most democracies do that naturally in a variety of ways every week, and it is a perfectly reasonable way to proceed.
It is not reasonable to set up bodies, in the financial sphere or anywhere else, and presume to second-guess them. I have lost count of the number of times that I have been told by Ministers at the Dispatch Box that it is inappropriate to ask them to interfere in the day-to-day management even of public bodies for which they are responsible, because it is not their job to second-guess the people they appointed to manage those institutions. That is a comparable analogy. The constitution, the organisations and the personnel can be changed, but there is no point in setting up bodies and taking decisions away from them.

Mr. Michael Spicer: The hon. Gentleman is building his case on the idea proposed by Labour Front-Bench Members that a fixed exchange rate must be established and that interest rate policies should follow from that.
The hon. Gentleman says that he likes fixed exchange rates but did not like the one that applied when Britain entered the ERM. Will he give us a clue as to the exact level of the exchange rate that he would have thought appropriate? Was it when we were shadowing the deutschmark downwards and would have had a 4 per cent. interest rate? That would not have lasted long. It would have blown apart as easily as the one that exploded on white Wednesday. What are the Labour and Liberal Front-Bench spokesmen saying? Even the Government, temporarily at least, have said that they are not subordinating all their policies to a fixed exchange rate, but the Labour party and the Liberal party seem to be pursuing that idea.

Mr. Bruce: We could dwell on the reasons that the exchange rate mechanism came under pressure, but I do not intend to do so. We could debate whether or not the Chancellor was offered realignment within the mechanism, which could have enabled it to continue on a different basis, leading to a reassessment of the German mark. The ERM failed because of a number of factors, and its failure does not mean that the reasons for being in it were unsound. More fundamentally, its failure does not alter the case for a single currency. Rather, it strengthens the case, because a single currency would be less open to speculation than 12 currencies trying to maintain agreed parities.

Mr. Austin Mitchell: How do we get there?

Mr. Bruce: I intend to develop my argument in my own way. I have given way several times, but I have a number of points still to make.
I made the point that the central bank would operate under a constitution written by politicians. It would be independent but also accountable.

Sir Teddy Taylor: Rubbish.

Mr. Bruce: The hon. Gentleman can say, "Rubbish," if he likes, but that is how the bank would operate.
The bank's board members would be appointed by the Governments of the member states and would be representative of them. It would report annually to the European Parliament, European Council and European Commission, and its policies may be debated in the Parliament. That is a much more orderly and genuinely democratic way of going about things than having banks that are subject to short-term political pressures from politicians in a hole trying to manipulate them.
People have every reason and right to say that they do not like or want a central bank—there are perfectly reputable arguments against one—but the argument that a central bank is undemocratic does not stand up. That is by definition to say that countries such as the United States, Germany and New Zealand that have a central bank are not democratic, whereas most of them are rather more successful democracies than our own. They have operated their economies with much more success over a longer period—certainly in the case of Germany—than we have done. We can at least acknowledge that they may have something from which we can learn, rather than abuse the notion of a central bank in a non-intelligent way.
Another argument frequently used concerns the sovereignty of the House of Commons. That is a matter of opinion. Some of us believe that the sovereignty of the House is used not to liberate the citizens of this country but occasionally to enslave them. Members of Parliament can take whatever power they choose by a simple majority in the House, and the citizens of this country have no guarantee against abuse of power. Achieving a majority in the House might be easier—as the hon. Member for Southend, East (Sir T. Taylor) believes—than achieving a majority in the country. Why else does the hon. Gentleman campaign for a referendum?

Mr. Benn: It is the interrelationship between proportional representation and a central bank. One could give people any electoral system—such as one under which national lists and the votes of the seats correspond—but ultimately, the electorate could not control economic policy no matter how they voted. That would not be democratic. That is where the proportional representation argument is totally phoney. One might offer the electorate the system that the hon. Gentleman's party thinks is better, but in the end they would not control power because, as the hon. Gentleman agrees, it would be handed to somebody else.

Mr. Bruce: I do not want to be drawn too far down that road. The right hon. Gentleman raised the issue of the voting system, not me. I was talking about matters on which he and I agree—such as a Bill of Rights and the rights of citizens being written in as guarantee against the abuse of Parliament, however that Parliament may be elected. I do not regard proportional representation as the definitive answer to all questions of freedom and democracy. There must be other guarantees that do not exist in this country. So far, freedom and democracy have not been seriously and totally abused, although they have been frequently undermined.

Mr. Richard Shepherd: Will the hon. Gentleman give way?

Mr. Bruce: I should like to get on.
We must consider a question to which the amendments at least relate: how are the Government to proceed from


their present stance? They are currently reserving their position on European monetary union, which is a three-stage process. We need to establish how they can go on to the third stage if they do not plan to go through the second. I hope that the Financial Secretary will explain how the Government's opt-out will, or will not, work. Alternatively, if they decide to opt in without having gone through the second stage, how can they proceed from the first stage to the third without transition?
I understand that, under the terms of the treaty, stage 2 requires us to make preparations to bring our own domestic central bank into line with the provisions of the independent bank that would be required by stage 3. If the Government resist the mechanism, how are we to achieve that in one go? There is a danger that we shall suddenly have to run extremely fast to catch up if we finally decide to go for monetary union. That is why I believe it makes sense for Britain to consider creating a more independent central bank, on its own merits and on our own terms, whether or not we opt for monetary union. First—as I have argued—that would be a better way in which to run the British economy; secondly, it would achieve the transition from an independent British bank to European monetary union with much less disruption than would otherwise occur.
I am particularly disturbed that the Government, under pressure, have gone for the opt-out, because I believe that that has had serious consequences for the development of the British economy and Britain's role as a financial centre. When I was a member of the Select Committee on Trade and Industry, we considered the implications of the single market for financial services. We were told—not only by bankers in Paris, Madrid and Milan, but even by bankers in Frankfurt—that, in their view, if we moved towards monetary union, Britain's case for securing the headquarters of the European bank would be overwhelming, given the importance of the City of London and the political argument that Britain was entitled to take a major prize from the process.
By deciding to sign the treaty, but not necessarily to sign up for full economic and monetary union, we gave away all our bargaining position. The Germans now assume that the prize will go elsewhere, and believe that they have a very good chance of winning it. For the very reasons cited by Conservative Members, I think that it would be undesirable for the bank to be located in Germany. It is important symbolically to make it clear that, if we proceed to European monetary union, there will be a European bank and a European currency, rather than a Bundesbank and a deutschmark. Britain could have secured a pivotal role, but the Government have effectively thrown that role away.
Those are not just my words; they were uttered to me 10 days ago by Sir Leon Brittan. "How," he asked, "can I possibly suggest that Britain should have the headquarters of a club that it has not yet decided to join?"

Sir Peter Tapsell: The German Parliament has reserved its position on the single currency and will have to have another vote, which we are not necessarily promised, but how does that strengthen the German claim to have the central bank? The issue is entirely open, and the constitutional position of the two countries is the same.

Mr. Bruce: If the Germans decided not to be part of the single currency, the enterprise would collapse in any case.
However, they signed up for the principle without demur at the beginning. Some Conservative Members claim to favour the development of the Community but oppose the Maastricht treaty. That is like saying that they will play golf on the same course as everyone else but that they are to get a free lift out of all the bunkers. Surprisingly, other people are not willing to play under those rules.
In the long term, it is not realistic to believe that Britain can maintain credibility within the European Community and opt-out of major developments. The danger is that the majority of the members of the Government do not intend to opt out. They intend to move towards a central bank and European monetary union, but have gone for the opt-out clause because they thought that they needed it to get the proposals accepted by the Conservative party. The contributions made in debates by Conservative Members show that they have received very little gratitude for that, so the Government have paid a high price in terms of the national interest, for no political pay-off within the party. That is something for which they will be held accountable.
The argument that there is to be one unified, centralised bank does not accord with the practicalities of how the Community will develop. That is borne out by the wording of article 107, which refers to the European central bank or the central banks of member states. It is inevitable that the central bank will work through the central banks of the member states and that it will be—to use a word which causes hackles to rise among Conservative Members—a quasi-federal arrangement rather than a wholly unitary, central operation. That in itself gives scope for a more democratic approach.
It is our contention that an independent central bank will be much more effective in pursuing policies which will bring down inflation. That is not only theoretically true but practically proven in countries which have such an institution. It is desirable for the United Kingdom to move in that direction as quickly as possible. It is wholly compatible with our democratic institutions and with broad accountability, and merely removes the day-to-day interference from the operations of the bank.
I agree that convergence will take longer than some have argued. Once it is achieved, the single market which is so enthusiastically embraced by Conservative Members will ultimately not be sustainable without a single currency and bank. We must take it step by step and must be prepared to renegotiate. That is how all democratic institutions develop. However, the process must be formalised step by step, and that is especially true when dealing with the present national frontiers. That is the evolution of constitutional advance.
It is perhaps a problem for this country that we do riot have a written constitution. As we do not have such a constitution, we do not understand that, for most people, agreements must be written down and reviewed and amended from time to time. Constitutional review is a normal process in most democratic countries. If we understood that better, we might be less concerned about and afraid of what is being proposed.
The European Community is a great association of democratic states trying to build a strong economic base on which they can create their own prosperity and compete effectively with other major blocs such as the United States, Japan, the Pacific rim and, perhaps in the long run, the eastern countries with which we can also develop trading partnerships.
I do not accept that the EC is a closed community; it is an open, free-trade community. But the stronger we are internally, the better we shall be able to trade externally. The mechanisms in the treaty are an essential step, and I greatly regret that this country is dragging its feet and sullying its credibility by means of the process that the House is now going through. The longer it takes, the less influence we shall have in shaping the Community, and the more damage will have been done to our long-term national interests.

Mr. Radice: I shall argue the case for a European central bank. I believe that it is inevitable that a single market should have a single currency. There is indeed a strong case for a single currency. I was interested to hear that, although he argued against a European central bank, my hon. Friend the Member for Kingswood (Dr. Berry) accepted that there were plus points in favour of a single currency. He said, rightly, that there would be a gain on transaction costs not only for businesses but for tourists and other travellers, and that a single currency would get rid of currency instability.
More important than those advantages is the fact that a single currency underwrites a single market. If currencies compete against one another and develop a system of competitive devaluation, which several of my hon. Friends seem to support, that is the surest way of destroying a single market—and it could well happen. If there is a single currency, a single monetary authority is also needed, and that is the case for a European central bank. As I shall argue, there is a strong case for such a bank to operate independently.
Of course, the political motivation behind a European central bank is that it is a way to escape from German domination of monetary policy. I know that the hon. Member for East Lindsey (Sir P. Tapsell) is worried about German domination of European monetary policy, and he once talked about German bankers as being like panzer generals. If he is really worried about that idea, he should support the idea of a European central bank, because that is the way to stop German domination. It would give every country in Europe a hand, a say—

Mr. Bryan Gould: Nonsense.

Mr. Radice: Yes, it would. Would my hon. Friend like to intervene?

Mr. Gould: I shall make my own speeches.

Mr. Radice: I am glad to hear that. What I have said is not nonsense; it is true. That is why the French have been so enthusiastic about economic and monetary union. One of the weaknesses of the ERM is precisely the fact that it is dominated by German monetary policy and the German currency.
I admit that I quite like central bankers. I do not see them as demons, as my hon. Friends do. I happen to believe that, if we put a number of central bankers together, of course they will act as central bankers—but as central bankers from different countries. Over the past three weeks, I have had the experience of meeting the governors of the central banks of France, Spain and Germany, and they are all very different—[Interruption.]

I did not go to the Dutch central bank, but I hope to do so. [Interruption.] I was not even offered lunch—unlike the hon. Member for East Lindsey, who was offered lunch by the Italian Foreign Minister. [Interruption.] They did not offer me lunch or dinner—[Interruption.]—and they have not gone to gaol. Neither have I—not yet, anyway.
The central bankers were all very different: they were different because they were Frenchmen, Germans and Spaniards who looked at things from their own national angle. The point about the European central bank is that it will comprise the governors of the different central banks. Over them will be an executive with eight representatives who do not have to be bankers and who will bring to the European central bank different experiences from different countries.

Mr. Cash: Would the hon. Gentleman care to examine the provisions relating to the autonomy of the central bank? Is he aware that what he has just said about the individual bankers being able to represent their national interests is directly contradicted not only by article 7 of the protocol on the central bank, which says that they may neither seek nor take instructions, but even in stage 2, in which the same applies to the central bank governors in the European Monetary Institute? Does the hon. Gentleman accept that his argument is built on sand?

Mr. Radice: Of course it is not built on sand. I shall come to the issue of operational independence. It is a good principle. I see nothing wrong with the article that has been bandied about by all those who oppose Maastricht and the Community. It is a sensible way of ensuring that the bank acts independently in an operational way, as I believe it should. I do not believe that there is any other way in which it can operate if it is to be effective.
We have heard much about how terrible it is that the European central bank should have price stability as its primary objective. But what does one expect from a central bank? Surely that is what we want from a central bank. I happen to believe that there is a strong argument for price stability. People in my constituency do not like the currency to be debauched.

Mr. Gould: What about living standards?

Mr. Radice: I shall come to that in a moment, if my hon. Friend will wait.
There is nothing wrong with price stability as an objective for a central bank. As my hon. Friend the Member for Hartlepool (Mr. Mandelson) pointed out in a notable earlier speech—I think about three months ago—the central bank operates within the much wider context of an overall economic policy that is contained in article 2. The bank is only in charge of monetary policy, and that monetary policy does not include the exchange rate.

Dr. Berry: As it is not possible to achieve price stability or zero inflation with 3 or 4 million people unemployed, how many more people would need to be unemployed and how much deeper would the recession need to be to achieve price stability? Will my hon. Friend explain that to the Committee?

Mr. Radice: If my hon. Friend wants to be entirely literal about this, he is perfectly entitled to do so. I take price stability to mean that one does not have a roaring rate of inflation. That is what the treaty is referring to.

Dr. Berry: Does my hon. Friend recognise that the phrase "price stability" does not mean other than roaring inflation? Does he take it to mean stable prices and zero inflation? How many more people must be unemployed to achieve the overriding objective of zero inflation?

Mr. Radice: As I said, my hon. Friend is being entirely literal.

Mr. Gould: That is what it says.

Mr. Radice: I appreciate that my hon. Friend the Member for Dagenham (Mr. Gould) is enthusiastic about the issue. He likes to read into every word of the treaty some terrible thing that is about to happen. In fact, it does not say "zero inflation" but "price stability", and I do not see anything wrong in price stability.

Mr. Mandelson: My hon. Friend the Member for Durham, North (Mr. Radice) is saying that it is proper and legitimate for price stability to be a primary goal for an independent central bank to pursue. But it is not the only goal. There are other goals and other policy imperatives, and no doubt attention will be given to them all. It is up to Ministers and other politicians to decide among those goals, but it is proper for the central bank to try to pursue that goal of price stability.

Mr. Radice: I could not put it better myself. A carefully defined set of powers will be in the hands of the central bank—[Interruption.] There are other powers—for example, on exchange rate policy—in the hands of the European Council. Fiscal policy is in the hands of nation states, except in so far as there are common rules and procedures, as there should be, if there is to be a common European policy.

Sir Teddy Taylor: rose—

Mr. Radice: I will not give way. There is too much noise—[Interruption.]—and I would not be able to hear the hon. Gentleman.

The Chairman of Ways and Means (Mr. Michael Morris): Order. The Committee should be courteous to the hon. Member for Durham, North (Mr. Radice) and listen to his words.

Mr. Radice: It has been said that economic and monetary union always works to the disadvantage of the poorer regions of Europe. That is true, which is why there is a cohesion fund and structural funds. I agree that they are not yet big enough—[Interruption.]—and there is in place a framework in which it is possible to deal with some of the disadvantages that arise from a single currency and economic and monetary union.
Much has been said about operational independence. There is a strong case for that, of which the model of the Bundesbank is a good example. Of course, the Bundesbank works from a history different from ours. It works from the experience of Weimar, when the politicians debauched the currency. That is why people in Germany are greatly concerned to have a stable price regime—[Interruption.]—and why the Bundesbank is a popular organisation. Indeed, it has been shown to be the most popular organisation in Germany. It must be said that, in Germany, bankers are more popular than politicians. I do not see anything wrong with having an independent bank or an independent European bank, and I do not see it as anti-democratic.
Like my hon. Friends, I shall argue for the strengthening of ECOFIN, a European Commission and the strengthening of the power of the European Parliament. I do not see anything wrong with operational independence or the beginnings of the accountability features in the Maastricht treaty. The question which arises is whether EMU will happen. Of course that is not certain. It is possible that competitive devaluation—

It being Ten o'clock, THE CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress.

Motion made, and Question put forthwith, pursuant to Standing Order No. 14 (Exempted business),
That, at this day's sitting, the European Communities (Amendment) Bill may be proceeded with, though opposed, until any hour.—[Mr. Nicholas Baker.]

The House divided: Ayes 296, Noes 279.

Division No. 203]
[10 pm


AYES


Adley, Robert
Cormack, Patrick


Ainsworth, Peter (East Surrey)
Couchman, James


Aitken, Jonathan
Critchley, Julian


Alexander, Richard
Currie, Mrs Edwina (S D'by'ire)


Alison, Rt Hon Michael (Selby)
Curry, David (Skipton & Ripon)


Alton, David
Dafis, Cynog


Amess, David
Davis, David (Boothferry)


Ancram, Michael
Day, Stephen


Arbuthnot, James
Deva, Nirj Joseph


Arnold, Jacques (Gravesham)
Devlin, Tim


Arnold, Sir Thomas (Hazel Grv)
Dickens, Geoffrey


Ashby, David
Dicks, Terry


Ashdown, Rt Hon Paddy
Dorrell, Stephen


Atkinson, David (Bour'mouth E)
Douglas-Hamilton, Lord James


Atkinson, Peter (Hexham)
Dover, Den


Baker, Nicholas (Dorset North)
Duncan, Alan


Baldry, Tony
Dunn, Bob


Banks, Matthew (Southport)
Durant, Sir Anthony


Banks, Robert (Harrogate)
Dykes, Hugh


Bates, Michael
Eggar, Tim


Bellingham, Henry
Elletson, Harold


Beresford, Sir Paul
Emery, Rt Hon Sir Peter


Blackburn, Dr John G.
Evans, David (Welwyn Hatfield)


Booth, Hartley
Evans, Jonathan (Brecon)


Boswell, Tim
Evans, Nigel (Ribble Valley)


Bottomley, Peter (Eltham)
Evans, Roger (Monmouth)


Bottomley, Rt Hon Virginia
Evennett, David


Bowden, Andrew
Faber, David


Bowis, John
Fabricant, Michael


Brandreth, Gyles
Fairbairn, Sir Nicholas


Brazier, Julian
Fenner, Dame Peggy


Bright, Graham
Field, Barry (Isle of Wight)


Brooke, Rt Hon Peter
Fishburn, Dudley


Brown, M. (Brigg & Cl'thorpes)
Forman, Nigel


Browning, Mrs. Angela
Forsyth, Michael (Stirling)


Bruce, Ian (S Dorset)
Forth, Eric


Bruce, Malcolm (Gordon)
Foster, Don (Bath)


Burns, Simon
Fowler, Rt Hon Sir Norman


Burt, Alistair
Fox, Dr Liam (Woodspring)


Butterfill, John
Fox, Sir Marcus (Shipley)


Campbell, Menzies (Fife NE)
Freeman, Roger


Carlile, Alexander (Montgomry)
French, Douglas


Carlisle, Kenneth (Lincoln)
Gale, Roger


Carrington, Matthew
Gallie, Phil


Channon, Rt Hon Paul
Garel-Jones, Rt Hon Tristan


Chapman, Sydney
Garnier, Edward


Churchill, Mr
Gillan, Cheryl


Clark, Dr Michael (Rochford)
Goodlad, Rt Hon Alastair


Clarke, Rt Hon Kenneth (Ruclif)
Goodson-Wickes, Dr Charles


Clifton-Brown, Geoffrey
Gorst, John


Coe, Sebastian
Grant, Sir Anthony (Cambs SW)


Colvin, Michael
Greenway, Harry (Ealing N)


Congdon, David
Greenway, John (Ryedale)


Conway, Derek
Griffiths, Peter (Portsmouth, N)


Coombs, Anthony (Wyre For'st)
Grylls, Sir Michael


Coombs, Simon (Swindon)
Gummer, Rt Hon John Selwyn


Cope, Rt Hon Sir John
Hague, William






Hamilton, Rt Hon Archie (Epsom)
Merchant, Piers


Hamilton, Neil (Tatton)
Michie, Mrs Ray (Argyll Bute)


Hampson, Dr Keith
Milligan, Stephen


Hanley, Jeremy
Mills, Iain


Hannam, Sir John
Mitchell, Andrew (Gedling)


Hargreaves, Andrew
Mitchell, Sir David (Hants NW)


Harris, David
Monro, Sir Hector


Haselhurst, Alan
Montgomery, Sir Fergus


Hawkins, Nick
Moss, Malcolm


Hayes, Jerry
Needham, Richard


Heald, Oliver
Nelson, Anthony


Heath, Rt Hon Sir Edward
Neubert, Sir Michael


Heathcoat-Amory, David
Newton, Rt Hon Tony


Hendry, Charles
Nicholls, Patrick


Heseltine, Rt Hon Michael
Nicholson, David (Taunton)


Hicks, Robert
Nicholson, Emma (Devon West)


Higgins, Rt Hon Sir Terence L.
Norris, Steve


Hill, James (Southampton Test)
Onslow, Rt Hon Sir Cranley


Hogg, Rt Hon Douglas (G'tham)
Oppenheim, Phillip


Horam, John
Ottaway, Richard


Hordern, Rt Hon Sir Peter
Page, Richard


Howard, Rt Hon Michael
Paice, James


Howarth, Alan (Strat'rd-on-A)
Patten, Rt Hon John


Howell, Rt Hon David (G'dford)
Pattie, Rt Hon Sir Geoffrey


Hughes Robert G. (Harrow W)
Peacock, Mrs Elizabeth


Hughes, Simon (Southwark)
Pickles, Eric


Hunt, Rt Hon David (Wirral W)
Porter, Barry (Wirral S)


Hunt, Sir John (Ravensbourne)
Portillo, Rt Hon Michael


Hunter, Andrew
Powell, William (Corby)


Jack, Michael
Rathbone, Tim


Jackson, Robert (Wantage)
Redwood, John


Johnson Smith, Sir Geoffrey
Renton, Rt Hon Tim


Johnston, Sir Russell
Richards, Rod


Jones, Gwilym (Cardiff N)
Riddick, Graham


Jones, Ieuan Wyn (Ynys Môn)
Robathan, Andrew


Jones, Robert B. (W Hertfdshr)
Roberts, Rt Hon Sir Wyn


Jopling, Rt Hon Michael
Robertson, Raymond (Ab'd'n S)


Kellett-Bowman, Dame Elaine
Robinson, Mark (Somerton)


Kennedy, Charles (Ross,C&S)
Rowe, Andrew (Mid Kent)


Key, Robert
Rumbold, Rt Hon Dame Angela


Kilfedder, Sir James
Ryder, Rt Hon Richard


King, Rt Hon Tom
Sackville, Tom


Kirkhope, Timothy
Sainsbury, Rt Hon Tim


Kirkwood, Archy
Scott, Rt Hon Nicholas


Knight, Mrs Angela (Erewash)
Shaw, David (Dover)


Knight, Greg (Derby N)
Shaw, Sir Giles (Pudsey)


Knight, Dame Jill (Bir'm E'st'n)
Shephard, Rt Hon Gillian


Knox, David
Shepherd, Colin (Hereford)


Kynoch, George (Kincardine)
Shersby, Michael


Lait, Mrs Jacqui
Smith, Tim (Beaconsfield)


Lamont, Rt Hon Norman
Soames, Nicholas


Lang, Rt Hon Ian
Spencer, Sir Derek


Leigh, Edward
Spicer, Sir James (W Dorset)


Lennox-Boyd, Mark
Spink, Dr Robert


Lester, Jim (Broxtowe)
Spring, Richard


Lidington, David
Sproat, Iain


Lilley, Rt Hon Peter
Squire, Robin (Hornchurch)


Lloyd, Peter (Fareham)
Stanley, Rt Hon Sir John


Llwyd, Elfyn
Steel, Rt Hon Sir David


Luff, Peter
Steen, Anthony


Lyell, Rt Hon Sir Nicholas
Stephen, Michael


Lynne, Ms Liz
Stern, Michael


MacGregor, Rt Hon John
Stewart, Allan


MacKay, Andrew
Streeter, Gary


Maclean, David
Sumberg, David


Maclennan, Robert
Sykes, John


McLoughlin, Patrick
Taylor, Ian (Esher)


Madel, David
Taylor, John M. (Solihull)


Maitland, Lady Olga
Taylor, Matthew (Truro)


Major, Rt Hon John
Temple-Morris, Peter


Malone, Gerald
Thomason, Roy


Mans, Keith
Thompson, Sir Donald (C'er V)


Marland, Paul
Thompson, Patrick (Norwich N)


Marshall, John (Hendon S)
Thornton, Sir Malcolm


Marshall, Sir Michael (Arundel)
Thurnham, Peter


Martin, David (Portsmouth S)
Townsend, Cyril D. (Bexl'yh'th)


Mates, Michael
Tracey, Richard


Mawhinney, Dr Brian
Tredinnick, David


Mayhew, Rt Hon Sir Patrick
Trotter, Neville


Mellor, Rt Hon David
Twinn, Dr Ian





Tyler, Paul
Whittingdale, John


Vaughan, Sir Gerard
Widdecombe, Ann


Viggers, Peter
Wiggin, Sir Jerry


Waldegrave, Rt Hon William
Wigley, Dafydd


Walden, George
Willetts, David


Wallace, James
Wolfson, Mark


Waller, Gary
Wood, Timothy


Wardle, Charles (Bexhill)
Yeo, Tim


Waterson, Nigel
Young, Sir George (Acton)


Watts, John



Wells, Bowen
Tellers for the Ayes:


Wheeler, Rt Hon Sir John
Mr. David Lightbown and


Whitney, Ray
Mr. Irvine Patnick.


NOES


Abbott, Ms Diane
Cunningham, Rt Hon Dr John


Adams, Mrs Irene
Darling, Alistair


Ainger, Nick
Davidson, Ian


Ainsworth, Robert (Cov'try NE)
Davies, Bryan (Oldham C'tral)


Allen, Graham
Davies, Rt Hon Denzil (Llanelli)


Anderson, Donald (Swansea E)
Davies, Ron (Caerphilly)


Anderson, Ms Janet (Ros'dale)
Davis, Terry (B'ham, H'dge H'l)


Armstrong, Hilary
Denham, John


Banks, Tony (Newham NW)
Dewar, Donald


Barnes, Harry
Dixon, Don


Barron, Kevin
Dobson, Frank


Battle, John
Donohoe, Brian H.


Bayley, Hugh
Dowd, Jim


Beckett, Rt Hon Margaret
Dunwoody, Mrs Gwyneth


Beggs, Roy
Eagle, Ms Angela


Bell, Stuart
Eastham, Ken


Benn, Rt Hon Tony
Enright, Derek


Bennett, Andrew F.
Etherington, Bill


Benton, Joe
Evans, John (St Helens N)


Bermingham, Gerald
Ewing, Mrs Margaret


Berry, Dr. Roger
Fatchett, Derek


Betts, Clive
Field, Frank (Birkenhead)


Biffen, Rt Hon John
Fisher, Mark


Blair, Tony
Flynn, Paul


Blunkett, David
Foster, Rt Hon Derek


Boateng, Paul
Foulkes, George


Body, Sir Richard
Fraser, John


Boyce, Jimmy
Fyfe, Maria


Boyes, Roland
Galbraith, Sam


Bradley, Keith
Galloway, George


Bray, Dr Jeremy
Gapes, Mike


Brown, Gordon (Dunfermline E)
Gardiner, Sir George


Brown, N. (N'c'tle upon Tyne E)
Garrett, John


Budgen, Nicholas
George, Bruce


Burden, Richard
Gerrard, Neil


Butcher, John
Gill, Christopher


Byers, Stephen
Godman, Dr Norman A.


Caborn, Richard
Godsiff, Roger


Callaghan, Jim
Golding, Mrs Llin


Campbell, Mrs Anne (C'bridge)
Gordon, Mildred


Campbell-Savours, D. N.
Gorman, Mrs Teresa


Canavan, Dennis
Gould, Bryan


Cann, Jamie
Grant, Bernie (Tottenham)


Carlisle, John (Luton North)
Griffiths, Nigel (Edinburgh S)


Cash, William
Griffiths, Win (Bridgend)


Chisholm, Malcolm
Grocott, Bruce


Clapham, Michael
Gunnell, John


Clark, Dr David (South Shields)
Hain, Peter


Clarke, Eric (Midlothian)
Hall, Mike


Clarke, Tom (Monklands W)
Hanson, David


Clelland, David
Harvey, Nick


Clwyd, Mrs Ann
Henderson, Doug


Cohen, Harry
Heppell, John


Connarty, Michael
Hill, Keith (Streatham)


Cook, Frank (Stockton N)
Hinchliffe, David


Cook, Robin (Livingston)
Hoey, Kate


Corbett, Robin
Hogg, Norman (Cumbernauld)


Corbyn, Jeremy
Home Robertson, John


Corston, Ms Jean
Hood, Jimmy


Cousins, Jim
Hoon, Geoffrey


Cran, James
Howarth, George (Knowsley N)


Cryer, Bob
Howells, Dr. Kim (Pontypridd)


Cummings, John
Hoyle, Doug


Cunliffe, Lawrence
Hughes, Kevin (Doncaster N)


Cunningham, Jim (Covy SE)
Hughes, Robert (Aberdeen N)






Hughes, Roy (Newport E)
Pendry, Tom


Hutton, John
Pickthall, Colin


Illsley, Eric
Pike, Peter L.


Ingram, Adam
Pope, Greg


Jackson, Glenda (H'stead)
Powell, Ray (Ogmore)


Jackson, Helen (Shef'ld, H)
Prentice, Ms Bridget (Lew'm E)


Jamieson, David
Prentice, Gordon (Pendle)


Janner, Greville
Prescott, John


Jessel, Toby
Primarolo, Dawn


Jones, Barry (Alyn and D'side)
Purchase, Ken


Jones, Jon Owen (Cardiff C)
Quin, Ms Joyce


Jones, Lynne (B'ham S O)
Radice, Giles


Jones, Martyn (Clwyd, SW)
Randall, Stuart


Kaufman, Rt Hon Gerald
Raynsford, Nick


Keen, Alan
Reid, Dr John


Kennedy, Jane (Lpool Brdgn)
Robertson, George (Hamilton)


Khabra, Piara S.
Robinson, Geoffrey (Co'try NW)


Kinnock, Rt Hon Neil (Islwyn)
Robinson, Peter (Belfast E)


Knapman, Roger
Roche, Mrs. Barbara


Lawrence, Sir Ivan
Rogers, Allan


Legg, Barry
Rooker, Jeff


Leighton, Ron
Ross, Ernie (Dundee W)


Lestor, Joan (Eccles)
Ross, William (E Londonderry)


Lewis, Terry
Rowlands, Ted


Litherland, Robert
Ruddock, Joan


Livingstone, Ken
Salmond, Alex


Lloyd, Tony (Stretford)
Sedgemore, Brian


Lord, Michael
Sheerman, Barry


Loyden, Eddie
Sheldon, Rt Hon Robert


McAllion, John
Shepherd, Richard (Aldridge)


McAvoy, Thomas
Shore, Rt Hon Peter


McCartney, Ian
Short, Clare


McCrea, Rev William
Simpson, Alan


Macdonald, Calum
Skeet, Sir Trevor


McFall, John
Skinner, Dennis


McKelvey, William
Smith, Andrew (Oxford E)


McLeish, Henry
Smith, C. (Isl'ton S & F'sbury)


McMaster, Gordon
Smith, Rt Hon John (M'kl'ds E)


McNamara, Kevin
Smith, Llew (Blaenau Gwent)


McWilliam, John
Snape, Peter


Madden, Max
Soley, Clive


Maginnis, Ken
Spearing, Nigel


Mahon, Alice
Spicer, Michael (S Worcs)


Mandelson, Peter
Steinberg, Gerry


Marek, Dr John
Stevenson, George


Marlow, Tony
Stott, Roger


Marshall, David (Shettleston)
Strang, Dr. Gavin


Marshall, Jim (Leicester, S)
Straw, Jack


Martin, Michael J. (Springburn)
Sweeney, Walter


Martlew, Eric
Tapsell, Sir Peter


Maxton, John
Taylor, Mrs Ann (Dewsbury)


Meacher, Michael
Taylor, Sir Teddy (Southend, E)


Meale, Alan
Trimble, David


Michael, Alun
Turner, Dennis


Michie, Bill (Sheffield Heeley)
Vaz, Keith


Milburn, Alan
Walker, Bill (N Tayside)


Miller, Andrew
Walker, Rt Hon Sir Harold


Mitchell, Austin (Gt Grimsby)
Walley, Joan


Molyneaux, Rt Hon James
Wardell, Gareth (Gower)


Moonie, Dr Lewis
Wareing, Robert N


Morgan, Rhodri
Watson, Mike


Morley, Elliot
Wicks, Malcolm


Morris, Rt Hon A. (Wy'nshawe)
Wilkinson, John


Morris, Estelle (B'ham Yardley)
Williams, Rt Hon Alan (Sw'n W)


Morris, Rt Hon J. (Aberavon)
Williams, Alan W (Carmarthen)


Mowlam, Marjorie
Wilson, Brian


Mudie, George
Winnick, David


Mullin, Chris
Winterton, Mrs Ann (Congleton)


Murphy, Paul
Winterton, Nicholas (Macc'f'ld)


Oakes, Rt Hon Gordon
Worthington, Tony


O'Brien, Michael (N W'kshire)
Wray, Jimmy


O'Brien, William (Normanton)
Wright, Dr Tony


O'Hara, Edward



Olner, William
Tellers for the Noes:


O'Neill, Martin
Mr. Peter Kilfoyle and


Orme, Rt Hon Stanley
Mr. Andrew Mackinlay.


Parry, Robert

Question accordingly agreed to.

Again considered in Committee.

Question again proposed, That the amendment be made.

Mr. Radice: Before I was so rudely interrupted, I was making the case for the European central bank, and I was saying that there is a strong argument for independent operation. I felt that the Bundesbank was a very effective model because, although it was operationally independent, it worked within an overall economic policy which was laid down by politicians. I argued that we should support the idea of a European central bank because, if we wanted a single market, we had to have a single currency, and if we had a single currency we would need a single monetary authority. I argued that there was a case for having an independent central bank, and in this I argued against my hon. Friend the Member for Kingswood (Dr. Berry), who said that it was anti-democratic. I said that it was not necessarily anti-democratic to have an independent body set up by statute which was accountable, through reports, to the European Parliament and also to the European Council.
It is true that we cannot be certain that we will achieve economic and monetary union or that we will have a European central bank. It is quite possible that conditions in Europe will be so difficult that we will be unable to achieve economic and monetary union. It is possible that we shall enter an era of competitive devaluations. I know that some of my hon. Friends think that the great thing about economic policy is that one should devalue, and then devalue again, and then devalue again.

Mr. Austin Mitchell: My hon. Friend should not attribute such asinine views to his hon. Friends. One should devalue when a currency is uncompetitive. The test of a competitive currency is when one can balance trading accounts in conditions of full employment and high, and sustainable, growth.

Mr. Radice: As it happens, I agree. As my hon. Friend knows, I thought that we entered the exchange rate mechanism at too high a rate, and I said so at the time. We were overvalued, and I was in favour of devaluation. However, there is a danger that, if one spends one's time talking about devaluation for one's currency, other countries will want to devalue too, which will set up a structure of competitive devaluations as countries devalue against each other. That is the danger now, and once that happens it will start to undermine the single market.
In Europe there is a strong move towards protectionism by many people, and there is a danger that the single market will be undermined and that there will be protectionism. Competitive devaluations and protectionism will result in the sort of dangerous nationalism that we had in the 1930s.
A dangerous scenario is opening up before us, and there is therefore a strong case for a single market, a single currency, a single monetary authority and a single European bank. If we do not achieve those, the forces of disruption and division will triumph in Europe and it will be a loss for all the peoples of Europe. If that happens, it will be to the cost of the people of Britain and of my constituency.
If European monetary union goes ahead, the United Kingdom must be part of it, as it would be disastrous if we were left out. The Government's opt-out policy is dangerous, and it was devised for internal party reasons to


make Maastricht more palatable to the Tory party—it has not succeeded. That policy has meant that we are no longer taken seriously as a potential member of economic and monetary union, and it certainly writes us out of any prospect of geting the European central bank, or any of the European institutions, in the City of London, which will be a great loss for us.

Mr. Tim Rathbone: Does the hon. Gentleman accept that, since the treaty was struck, more opinon in Europe has come round to the British point of view that a single currency is unlikely to be achieved within the original timetable?

Mr. Radice: I have just visited a number of European countries with the Treasury Select Committee, and that is not the case. All the other countries are committed to the single currency—even Germany, which several Conservative Members have quoted as possibly being concerned about the currency. That is not surprising, as the Germans have the most to lose. The deutschmark is the strongest currency in Europe and the German central bank runs monetary policy. If the single currency and the European central bank are created, the show will no longer be German-dominated as it is now, but even the Germans support the principle of a single currency. All they are saying is that it must go ahead on present conditions, as they do not want the European central bank to be watered down; nor do they want countries to come in to EMU if they are incapable of being in it, which seems quite sensible.
It may be right to say that, in the event, EMU will not go ahead. We cannot read the future. I am saying simply that the alternative scenario is not a good one. Competitive devaluation and protectionism, with the single market bust open, is a very worrying prospect for all of us. People's concern about that matter is one of the driving forces behind economic and monetary union. If we are really at the heart of Europe, we should be in favour of the principle of economic and monetary union. If it eventually goes ahead, we ought to be part of it.

Sir Teddy Taylor: I wish that the hon. Member for Durham, North (Mr. Radice) could have spent a few moments in the Dining Room, where this matter was being discussed. He seems to think that Europe is a daydream land in which all the problems of the world and the nations will be solved by transferring all power and responsibility to central bodies. I wish that the hon. Gentleman could have met organisers from the port of Larne, Northern Ireland, who make the simple point that, as a result of what we are doing, competitor ports in the Republic of Ireland will receive grants of 85 per cent. to build exciting new facilities, which will achieve nothing but will steal business from Lame. The hon. Gentleman's notion that cohesion funds and structural funds will solve the problems of Europe is delusion. Things will not happen that way.
The main amendment in this group concerns article 107. The delightful Treasury Minister on the Front Bench, my hon. Friend the Financial Secretary to the Treasury, will be able to give a very speedy answer: that anyone looking at page 115 will see that article 107 does not, in the meantime, apply to the United Kingdom. On the other hand, associated with this amendment is the whole

structure of what the treaty is about. In no sense is it about the harmonisation of exchange rate policies; it is about the abolition of the rights of people. What my hon. Friends should realise, even at this late hour, is that if the treaty is approved, they will have to ask themselves what on earth they are to say to the voters at the next election.
If the people are unhappy about what the central bank is doing, if they feel that its policies are creating unemployment, what will they be able to do? At present, if they are unhappy with policies, they can vote another party into office. If they are unhappy about policies in the course of a Government's term of office, they can give a warning by voting for Opposition candidates in by-elections. But when all economic policy and decisions are transferred to central constitutions that are wholly outwith the control of elected bodies, the power of the people will have been completely and utterly destroyed.
I hope that, even at this late hour, hon. Members will think seriously about what they are doing to their democracy. They are removing completely people's power to express an opinion. They are taking away people's ability to express a view. Thus, if people are unhappy about what is happening, if they feel that something is wrong and unfair, if they feel that something damaging to the economy is being done, their only means of registering opposition will be to march, demonstrate and, basically, go about destroying the democracy that we have set out to achieve.
It must be appreciated that this was not always the view of Her Majesty's Government. I listen very carefully to what our excellent Prime Minister says. On 1 July 1991, in response to a question from the Leader of the Opposition, he said:
We have made our position clear about a European central bank. If that comes about, it is many years away and it would certainly need to be accountable to a directly elected body."—[Official Report, 1 July 1991; Vol. 194, c. 25.]
The argument that we are putting forward is that it is wrong in principle to have a European central bank without any type of people's control or any mechanism for the expression of people's views. I realise that some of my hon. Friends feel that they should go into the Lobby in support of the Government because that is the right thing to do, but they should realise that we are making decisions about something far more important than the future of the Government or of the Conservative party.
We are deciding whether people should still have control over the issues in our country and whether they should still be able to warn Governments at election time. If the central bank is established and assumes all the power envisaged, and the central institutions are effectively running all the economies, basically our democracy will be dead. People should appreciate what is happening. I do not believe that people appreciate the extent to which power has already gone and our democracy has disappeared.
10.30 pm
I received a delightful letter from the Prime Minister, who has always shown great courtesy and kindness in his dealings with people who support or oppose his policies. The letter was on a small issue relating to the Sikh community of Britain. They are probably the most law-abiding and decent bunch in our community. Those good and hard-working people faced a terrible problem. In


British law we have exempted them from having to wear helmets when riding motor cycles or working on building sites.
A European directive has been introduced which obliges them to wear helmets in other places such as engineering works. The British Government tried hard, on a majority vote issue, to obtain an exemption for the Sikhs. Sadly, our Government were out-voted. I wrote to the Prime Minister asking him whether—in the light of subsidiarity—he could ask the Commission to exempt the Sikhs. The answer that the Prime Minister sent to me was one of the most dreadful letters that I have received. The Prime Minister was courteous and kindly, as he always is, but he said:
We tried very hard, but without success, to obtain a derogation…Raising the issue again, now the Directive is in force, could well put the existing exemption at risk.
The Prime Minister of a democratically elected country said that he dare not even approach the Commission because, if he did, the provisions that have been made for the Sikh community would disappear. That does not show the lack of concern of our delightful Prime Minister for the Sikh community of Britain. I am sure that he cares about them deeply—we saw that in the way in which he tried o fight their case. However, the Prime Minister was saying that he dare not even ask the non-elected Commission, because, if he did, the right of the Sikhs to wear their turbans on motor bikes and building sites could be at risk.
The appalling TUPE regulations will effectively destroy privatisation in Britain—a controversial issue in this country today. Those regulations were part of the acquired rights directive which was passed in 1977; they were implemented by law in 1981 with what the British Government believed to be the law of the land. They said, "This is the law—it applies to commercial undertakings." Due to infraction proceedings taken by the European Commission—an unelected body—we now find that the law will apply to all sorts of privatisations and takeovers. It means that not only will future privatisations be difficult to achieve, but every British employer who has participated in a privatisation—[Interruption.] I see that my hon. Friend the Member for Leeds, North-West (Dr. Hampson) is shaking his head, but it happens to be true—

The Chairman: Order. I am having difficulty relating the hon. Gentleman's remarks to central banking. Perhaps he can help me.

Sir Teddy Taylor: I was referring to the issue as an example of the way in which our powers to influence matters have already disappeared. I was mentioning the matter briefly, not as part of my main argument. Something significant is happening to the powers of people and Parliament.
If we are concerned about the Sikhs—as we all are—there is nothing that we dare do. If we are concerned about the TUPE regulations, there is nothing that we can do. If we go ahead with the European central bank, there is nothing that we can do about basic economic policy or, more importantly, that the people can do with their votes.
Some people laugh and say, "What does it matter? Get the clever people to run things and don't give the power to the people." That is the sort of argument that people use against a referendum, when they say, "Don't let the people

decide—they don't know about it." When people's power is destroyed in any country, something very important is destroyed—the basis of a peaceful community.

Mr. Randall: The hon. Gentleman suggests that all decisions will be taken by the central bank. Does he agree that Ministers who are accountable to this Parliament will have a major influence on ECOFIN? Surely it is exaggerating to suggest that all powers—the hon. Gentleman used the word "all" several times—will reside with the central bank.

Sir Teddy Taylor: I am afraid that the hon. Gentleman is wrong. He is a conscientious attender at our debates and sincerely believes in Europe. I appeal to him to look at the duties of the central bank and at the powers that are being given to the various financial institutions such as the EMI and others. If he does that, he will see that, no matter what views or opinions are expressed, the basic policy must still be followed. I shall give an example from new clause 1—a suggestion by the Labour party that there should be an annual report to Parliament about what central banks are doing.
If that new clause is accepted and we pass a resolution that the central bank follows mad, stupid and irresponsible policies, it will have no effect of any sort, because the central bank has a legal obligation to follow the basic policies set out in the treaty. Some people say that it will not work out like that, but the treaty obliges all institutions to act in that way.
The second point that I hope hon. Members will appreciate is that, before we accept the idea that a central bank should be set up to solve all the problems and achieve low inflation—although in fairness any fool can achieve low inflation by creating 3 million unemployed—we should look at the examples of the recent miracle cures offered by the EEC.
I shall not refer in detail to the miracle cure for agriculture which was to give a fair deal to our farmers and consumers—the common agricultural policy. Despite the years in operation and all the reforms, we are now in the crazy situation where mountains of food and expenditure on the CAP are higher than they have ever been and the people are paying more than ever for their food compared with world prices. The system is a shambles and a nightmare and is not working. The same argument applies to the ERM, which is closely linked because, unfortunately, we are obliged to try to move back to fixed exchange rates when the treaty comes into force.

Dr. Norman A. Godman: I am grateful to the hon. Gentleman for showing his characteristic courtesy in giving way. He spoke about his correspondence with the Prime Minister. Has the hon. Gentleman at any time raised with the Prime Minister the likely location of the bank? Is the hon. Gentleman confident that it will be located in London with various agencies and functions carried out from a site in Edinburgh?

Sir Teddy Taylor: I have not raised that issue. When one opposes the establishment of a central bank, it is a bit devious to say, "I want it in my constituency or in London or Edinburgh." When one holds the view that the principle of a central bank that is based on policies of fixed exchange


rates is bad, it would be dishonest to suggest a location for it. I am sure that many hon. Members will suggest excellent places for the bank.

Mr. Geoffrey Dickens: How does the ballot box affect banking? If one banks with the Hong Kong and Shanghai bank, the Bundesbank or Barclays, one is not affected by the result of a general election. Hundreds of thousands of companies in this country have to rely on the good will of banks, often to keep them afloat. My hon. Friend grossly exaggerates and clearly does not understand banking.

Sir Teddy Taylor: My hon. Friend and his colleagues voted for this wonderful new arrangement called the ERM on the basis that it would bring growth and stability. I know that, as a splendid and respectable person, my hon. Friend did that with sincerity—not because he was told to do so by the Whips but because he knew it was the right idea. I appeal to him to think of the unemployed. Think of the people whose houses are being repossessed as a direct result of a policy that is economic lunacy.

Dr. Keith Hampson: That is not the fault of the exchange rate mechanism.

Sir Teddy Taylor: My hon. Friend says that is not the fault of the ERM. We know that the British people are having to pay a huge amount of extra cash in taxation—

The Chairman: Order. The hon. Gentleman has assiduously attended the Committee, but his remarks have little to do with the issue of a central bank. Will he please address the amendments?

Sir Teddy Taylor: Certainly, Mr. Morris. Once a central bank is established, we shall be obliged to return to the ERM and fixed exchange rates. The whole principle behind the central bank is monetary union based on fixed exchange rates. That will again create unemployment and misery, because if one tries to pretend that something is not its worth, one has to distort other factors.

Mr. Bill Walker: My hon. Friend, as a fellow Scot, will recognise that the United Kingdom's central bank is the Bank of England. He may care to inform my hon. Friend the Member for Littleborough and Saddleworth (Mr. Dickens) that the Royal Bank of Scotland, the Bank of Scotland, the Clydesdale bank and all the other banks in Scotland have no say in interest rates, because they are set centrally by the Bank of England.

Sir Teddy Taylor: My hon. Friend is absolutely right. The argument is made that we are giving power to the people by obtaining exemption from stage 3. In fact, they will be in the same position as the people of Scotland, who have a Scottish pound note but no control over the United Kingdom's economic policy.
There is not the slightest evidence that passing over all economic power to a central bank will make matters better for the people of Britain. I have sat here treaty after treaty, night after night, debate after debate hearing about the wonderful ideas coming from the EEC that will solve problems and make life better. I wish that my hon. Friends—including those who are smiling, on the Front Bench below the Gangway—would look at Europe today. Do

they see a growth in prosperity? Sadly, they see an area in structural decline and with mass unemployment. When countries such as America have steadily lowering unemployment rates, we should recognise that Europe is in structural decline. As a country stuck on the edge of that, ours would not benefit in any way.
We have tried the common agricultural policy, the ERM and other Euro-policies. When people say that a central bank is the answer, we should tell them that, on the basis of all the evidence, we do not accept it.
No one has argued in the debate that a central bank is a great idea. The European debate has changed dramatically since 1972. There always used to be a bunch of true enthusiasts who said, "This is going to be good. This is going to be great for Britain." With the arrival of the Single European Act, a good number of people still genuinely thought that it would be good for Britain. I gain the impression that very few people—apart from the small number of fanatics that one always finds in both parties—really believe that Maastricht will do any good for this country or its people.

Mr. Marlow: Surely my hon. Friend knows what has been happening in the background and in the Lobby and that the Government have been saying, "It isn't going to happen. Don't worry—there isn't going to be any monetary union. This horrible edifice isn't going to be built." If that is the case, the contract, and the legal detail—if that is what we are being asked to pass—is it not wrong that we should consider something that is nonsense and then vote for it?

Sir Teddy Taylor: Yes. I will come to that point in a second.
The Government say that if we do not give our approval, bad things will happen to Britain—that it will somehow be sidelined. We should ask ourselves whether it would make matters infinitely worse if we were prepared to say no to a central bank. Britain would be greatly strengthened. Time will tell. My hon. Friend is right to say that the arguments used now are, "Don't worry about a central bank or a single currency. It is not going to happen. It will all break down." Some people genuinely believe that.

Mr. Dykes: It will happen.

Sir Teddy Taylor: They know, for example, that fixed exchange rates can never work in the long term. There is no way in which all the countries will develop equally. The argument is made by some—including my hon. Friend the Member for Harrow, East (Mr. Dykes)—that the problem will be solved by dumping vast amounts of money on areas that are not doing so well, to bring them all up to the same level of achievement and activity. If one looks around the world one sees that that is nonsense and does not work.

Mr. Marlow: My hon. Friend the Member for Harrow, East (Mr. Dykes) has just said, from a sedentary position, that he believes that it will go ahead. Does that reassure my hon. Friend?

Sir Teddy Taylor: My hon. Friend the Member for Harrow, East (Mr. Dykes), who has consistently supported the EC, probably does believe that. I ask him to look back at what has happened to our economy, our democracy and, above all, the powers of the people since we joined the Community. I believe that some people are


supporting all this nonsense because they do not believe that it will happen, but some support it because they feel that we cannot act in any other way. Those people have lost hope and they have lost faith.
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Even if some people think that we should go ahead with the central bank and the transfer of power to non-elected boards, councils and commissions, we have no right to do that without informing and consulting the public. It is shamefully wrong that we should push ahead a massive change in our democratic system without telling and consulting the people.

Mr. Derek Enright: I am grateful to the hon. Gentleman for giving way; he always shows great courtesy in that regard.
I have some sympathy with the hon. Gentleman's arguments about democratic control. I, too, am worried about what is happening to the police, hospitals and the education system. What worries me is that I can find precious little in the Bank of England that responds democratically to the worries of my constituents in Hemsworth. The position has been the same under successive Governments of both hues.

Sir Teddy Taylor: That is the whole point. The hon. Gentleman may believe that Conservative policy on the police is rubbish and takes away democracy; that is a fair argument. He may believe that Conservative policies on education are terrible and undemocratic. He may feel that we are not using the controls of the Bank of England in the proper way. If he holds such views, however, he can go out there and fight, get people to vote for him and secure the return of a different Government who will approach things in a different way. The tragedy of the transfer of power to non-elected institutions—to boards, councils and commissions—is that, if the hon. Gentleman suddenly decides that those bodies are pursuing policies that are bad for employment and industry and dreadful for Britain, lie will be able to do nothing.

Mr. Enright: Will the hon. Gentleman explain how we elect the officials of the Bank of England?

Sir Teddy Taylor: As we know, the Governor of the Bank of England is appointed by the Government of the day and economic policy is determined by the Government. The present Government have pursued certain policies which they assure us will improve the economy and, of course, we hope that they are right; but the point is that, if they are not, people can do something about it. There is something terribly dangerous and bad about the taking of all power of control from the people and the ripping out of democracy.
I ask my hon. Friends to think about this. If the Maastricht Bill goes through and a central bank is established, what on earth will they tell voters at the next election? We shall have some control over the council tax and the grammar schools; we shall have some control over the amount of income tax within a global total of taxation, which will be subject to negotiation and determination on the part of non-elected bodies. Basically, however, the power of the people will go. I believe that the creation of a central bank and the monetary policies of the EC will create mass unemployment and misery and more protectionism; I think that it will be horrible for all our people.
I may be wrong, but the crucial point is that, if we agree to the Bill, what we had will have gone for ever. We shall not be able to sit down suddenly and say, "Let us change all this: it is not working." Sadly, we know from our experience of the common agricultural policy that policies do not simply get changed, particularly when many countries feel that they are doing very well out of them and getting lots of money.
I hope that we shall use the amendment not to try to score party points, but to persuade ourselves that something huge, important and significant is happening to our democracy. We have no right to allow that unless we are convinced that it will benefit our people—or, more important, unless we have given the people a chance to decide for themselves.

Mr. Shore: Like other hon. Members, I shall say something about the independence of the European central bank because it merits considerable discussion; but, before I do, I wish to mention the concept of the central bank and a single currency. The two clearly go together: we shall not have a central bank unless we are to have a single currency.
I am wholly unconvinced about the case for a single currency, which is central to the whole argument. It would be a serious mistake if we were to allow ourselves to be absorbed into a single currency, partly because of the difficult issue of convergence. We have had debates about convergence, purely monetarist indicator convergence and what we sometimes call convergence in real economic aggregates.
There is one particular difficulty about convergence. Let us suppose that, at one particular point in time, it could be arranged that all the countries which were potential or candidate members to join the single currency were all enjoying balance of payments equilibrium, full employment and other ideal circumstances. Even if it were possible at that moment to set up a single currency, it could not last. The conditions would change, and we all know the reasons. There is a dynamic working with different force and at a different speed in different parts of the vast area which would be formed in western Europe, and including the United Kingdom. The factors operating in different countries, and perhaps in different regions, are so clearly visible that the dream of a single currency looks like a nightmare when we start to consider the consequences of being locked into a single currency when there are differential rates of growth.
I did a simple calculation about relative movements in the growth of gross domestic product in the seven major economies of the western world. I took 1989 as 100 for all of them. By the end of this year, the estimates are as follows: France, which starts as 100 in 1989, reaches 107 by the end of 1993; Germany, which startes at 100, ends at 111; Japan, which also starts at 100, ends at 114; but the United Kingdom, which started at 100 in 1989, will be 99 at the end of 1993. Within four years, there is a spread of rates of growth, ranging from 14 per cent. for Japan and minus 1 per cent. for Britain. That could be different at different times, or we may do much better.
However, if there were no means of adjusting the rate of exchange of the yen and the pound—if they were frozen together—the consequences for the pound and the United Kingdom would be very severe. Throughout the history of the world economy as it has developed, there have always been movements and adjustments between currencies. There must be, otherwise there would be no tolerable way of making adjustments other than accepting that in the areas that are doing less well than others there would be constantly rising unemployment, whereas in the areas of great prosperity there would be ever-increasing investment. There would be an ever-increasing movement of people from the depressed areas to the areas that were doing well.
We know all this from our experience in our own country over the years. In the past we have had to use powerful instruments of regional policy to correct the tendency. The alternative would have been to let the south of England drain the north, Scotland and a large part of Wales, and let people crowd into the south—as happened to a large extent in the inter-war years.
If there is a single currency in Europe, inevitably there will be a differential rate of growth. We know where the strongest economy in the European Community is located—it is still in Germany, and when Germany has absorbed the former East Germany it will be the super-economy of the European continent. The effect of that on the United Kingdom and on other economies that are not as powerful, and are not growing as fast, will be as I have described. They will experience either rising unemployment or a substantial movement of their people and their investment to the areas of greatest growth.

Mr. Dickens: Does the right hon. Gentleman agree that convergence would be well-nigh impossible? I do not believe that there is a snowball's chance in hell of there being a single currency. The difficulties are compounded by the fact that, with more countries coming into the European Community, the criteria will not allow for convergence so easily, and the numbers complicate things further. I do not believe that we would ever get into that situation. Even if we did, we should of course maintain the opt-out clause—but I do not believe that we would ever have to use it.

Mr. Shore: It would not be impossible for those events to happen—although it would be foolish to allow them to happen.
In discussing the amendments, we must assume that the option to enter a single currency has been exercised—otherwise the debate would be rather unreal. I agree that that involves a hypothesis, and there is still a big question mark over it. In 1996, or whenever the moment of choice arrived, would the Government opt for a single European currency? Would they want to? In view of some of the criteria for opting in, would they be able to? I do not want to develop that argument now, because it would lead us back into another debate, about the transition—but what I fear most is that the Government may make a serious effort to opt in, which would involve a calamitous squeeze on the British economy. We know the problems that our economy is facing now, and from the financial statement we know what the prospects are for the next four or five years.
The conclusion to which I am coming is familiar to others who have addressed the problem. There may be a single currency, but there will be differential rates of growth and of prosperity. Therefore, either there will be a disastrous situation in the less prosperous and less dynamic regions, or there will have to be an enormously powerful regional policy.
With the best will in the world, there is not the will within the EC for a powerful regional policy. I know that the optimists in the Opposition will say, "Over the years we shall try to develop regional policy and try to pretend that we really all are absolutely identical in our motives and our feelings about each other. We shall come to the conclusion that our feelings about Italy, Greece and so on are exactly the same as our feelings today about our fellow countrymen." That may be a worthy ideal, but it is not the reality. It is difficult enough to sustain a strong regional policy in this United Kingdom.

Mr. Austin Mitchell: Does my right hon. Friend accept not only that that is unlikely but that, if it happened, we


would still be the second largest contributor unless the problem of redistribution was tackled so that contributions were measured in terms of ability to pay?

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Mr. Shore: That is absolutely right. The whole question of the criteria governing existing regional policy would need to be looked at and, indeed, changed, because that policy is built on objective 1 areas, which are receiving or will receive substantial assistance. Other areas of great need and rapid industrial change get very little regional assistance, and that assistance is not likely to increase.
I have made my point about the difficulty of sustaining a powerful regional policy within a single country. The difficulty of operating a really serious regional policy covering the whole of the half-continent of western Europe will be very much greater.
The only person ever to make a serious study of the problem was Sir Donald MacDougall, a most distinguished economist, who was chief economic adviser to the CBI and, before that, director-general of the Department of Economic Affairs. Donald concluded that one would need a shift of resources equal to 7 per cent. of the Community's GDP. The total European budget is about 1·2 per cent. and the regional fund accounts for about 15 per cent. of that sum. So we are talking about a sum 30, 40 or 50 times greater than what is now available in the enhanced structural funds that have existed since the European Single Act was passed.
The truth is that the enhancement of those funds was to take account of the introduction of a single European market. There has been no enhancement, and no proposal for the enhancement, of regional and structural funds to take account of the progress towards a single currency.

Mr. Hoon: The cohesion fund?

Mr. Shore: I accept that, but that was part of the whole package to get four particular countries, which were rather like client states, to take a favourable view. [Interruption.] I invite hon. Members to turn their mind to the meeting in Edinburgh and what Mr. Felipe Gonzalez was trying to achieve. Having established in principle the idea of a fund, he wanted a great deal for Spain—and he got it. The Spanish side of the bargain was, "If we don't get this, we will not give our approval."

Mr. Hoon: My right hon. Friend always advances a very logical argument. He talked about differential rates of growth. There are already differential rates of growth in each nation state—for example, the London area grows faster than the regions. That partly explains why unemployment is higher in the regions than has historically been the case in the capital city. The right hon. Gentleman would not, for one moment, blame that on the fact that the United Kingdom, like every other member state, has a single currency.
If I followed my right hon. Friend correctly, part of the justification of his argument was that such matters turn upon balance of payment flows and on the deficits created where some countries are growing faster than others. If there were a single currency, there would not be any purpose in calculating balance of payments deficits. We do not calculate the balance of payments deficit as between London and the north. We make no careful calculation of the movement of goods. My concern about my right hon. Friend's impeccably logical analysis is that it operates

from the existing system and presupposes that the position would not be significantly different after the introduction of a single currency.

Mr. Shore: That is an interesting point. My hon. Friend is quite correct in saying that the balance of payments problem, which reflects inbalances of economic performance, would not be visible in a single currency. But the underlying consequences would be the same. Unless there was a correction of some kind—an increase in resources put in—there would be an increase in unemployment in and a movement of people out of areas that were not doing well. We would lose, as it were, the danger signal of a balance of payments deficit. We would not be aware of the physical problems until a disastrous slump was upon us.

Mr. Bill Walker: For nearly 300 years, we in the United Kingdom have operated a single currency and a single bank. During periods of economic difficulty, the discontent and unhappiness felt by people in the regions soon made itself manifest to their parliamentary representatives. We have democratic control here, so we are able to act quickly in such circumstances.
A single currency and a single bank, with the absence of democratic accountability, is not the answer. The people of Britain can complain to, and about, us and there is the ability to change Governments, sometimes at relatively short notice. That represents a balancing factor, for at times we have moved people from poor to wealthy areas and have transferred vast amounts of taxpayers' money from wealthy to poor areas. We have been doing that for nearly 300 years, and the facts are there to be seen.

Mr. Shore: That raises the whole question of what is a community. We refer often to the European Community, but I am not sure that it is a community in the same sense that, for example, the United Kingdom is a community. We feel closer because they are our own people, and we are prepared to do more for them—as we are prepared to do more for our families—than we are prepared to do for others.
That does not mean that we shall be pig-headedly obstinate or ungenerous in our dealings with others. On the contrary, I hope that we shall be very generous. But it is no good pretending that there is the same degree of commitment and sense of genuine community and union between the countries of Europe as there is within each country. We must bear that in mind, particularly when we are talking about the need to transfer major resources to compensate for the effects of a single currency.

Mr. Enright: Does my right hon. Friend recall some of the difficulties he had when Secretary of State for the Environment? For example, when I chaired the West Yorkshire planning and transportation committee, we had some negotiations with him. I remember the way in which I thought he and his colleagues conducted a very centralised administration. I did not realise how little centralised it was until the Conservatives took control. Even so, the response we got was carefully noted in the region.
I suggest that many of the disparities in the regions are recognised more as a result of what is happening in Europe now—because it is essentially a Europe of the regions—than as a result of what is happening in central


Government. Much the same applies when we are in power, although slightly modified, or the Conservatives are in office.

Mr. Shore: My hon. Friend gives a strange viewpoint. Perhaps it reflects past insensitivities. In an earlier ministerial experience, when Secretary of State for Economic Affairs, I was responsible for regional policy. We had a picture, a map, of the whole country showing the state of employment and unemployment and the future commitment of new work into every travel-to-work area throughout the United Kingdom. We put enormous resources into a powerful economic regional policy. In addition to the old development areas, we had special development areas and intermediate areas. Later, as Secretary of State for the Environment, I was involved in putting resources into the inner cities, which had been neglected for too long.
We were able to do that because we had the knowledge, the information, the commitment and a sense of being one political community. We used the strength where we were strong to help weak areas in our country. That is natural; it is what one expects. That is the real meaning of community. The European Community is a different sort of community.

Mr. Bowen Wells: Would the right hon. Gentleman reflect on the experience of the United States, which created a single market among the states of America? The number of states increased over 100 years. A single currency among the states was not established until 100 years after the formation of a single market and the free movement of people. A single currency and a central federal bank were established because one currency became paramount—it became so strong that all the states decided that it would be better to have one currency and trade without the problems which resulted from the differential exchange rates among the states rather than continuously adjust them.
It seems that exactly the same process will take place in Europe because the deutschmark will become the common currency. With the common currency in the hands of the Germans, and with the Bundesbank under its present constitution—which involves currency stability only within the borders of German—we would have absolutely no say about or influence over monetary policy throughout Europe. Therefore, it is essential that we establish a central bank and a single currency which we can influence through democratic institutions.

The Chairman of Ways and Means (Mr. Michael Morris): Order. This is a long intervention. The hon. Member's point has been made.

Mr. Shore: The comparison with the United States is not helpful to us. There are so many obviously special circumstances in the history of the United States that one cannot make an easy comparison between what happened there and what may happen in western Europe. A factor which we cannot leave out when we look at the United States is that it has a single Government, a single central bank and a single currency.
I know that some Labour Members long for such a fulfilment and development. However, that is not the line taken by those on the Labour Front Bench—not publicly,

at any rate—or the Government Front Bench. Without that fulfilment and development, we will face serious problems, as the more honest federalists in the Labour party are willing to acknowledge.

Mr. Marlow: Will the right hon. Gentleman give way?

Mr. Shore: I will not give way because I want to move on.

Mr. Leighton: In addition to the original policies of the sort over which my right hon. Friend presided when he was Secretary of State, it is not the case that public expenditure is redistributed in nation states because richer people and richer areas pay in more and draw out less, and poorer people and poorer areas pay in less and draw out more in benefits? Is it not also the case that local government expenditure by rate support grants is redistributed and consists of transferred payments from richer areas to poorer areas?
Public expenditure in nation states is about 40 per cent., but the budget in the European Community is only slightly more than 1 per cent., most of which goes on agriculture. We are not comparing like with like. Public expenditure is minuscule and inadequate to overcome the damage which will be done by a single currency.

Mr. Shore: My hon. Friend is absolutely right, and it is relevant to the argument. When I think about the transfers which take place in the United Kingdom as a matter of course through rate support grants and so on, I sometimes say to myself that MacDougall, in his 7 per cent. of gross domestic product, greatly underestimated the sums which are needed. They are much less than the sums which are dispersed through the federal Government of the United States to the different states which make up the union. We have established that point.
The independence of the European central bank has been the subject of considerable discussion already. I have made it clear that I believe that the single currency idea is basically flawed. That is my position. I am holding on to that. I understand that many hon. Members are interested in the question whether a European central bank should be independent, more or less on the German model, or should be brought under ECOFIN.
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It is not necessary to read article 107 again. No one who attaches any importance to the meaning of words can doubt the strength of the commitment to an independent central bank. It is extraordinary. Not only shall the bank not seek or take instructions from Community or national institutions, but the Governments and the Community institutions
undertake to respect this principle and"—
almost unbelievably—
not to seek to influence the members of the decision-making bodies".
That declaration of independence goes far beyond anything which affects the federal bank in Washington or any other independent bank that I have ever heard of. The words
not to seek to influence
are almost unbelievable, but they are part of the treaty and have all the authority of the treaty. They have the authority that they may be interpreted, if need be, by the European Court of Justice. That is why provisions are put into treaties.

Mr. Radice: Will my right hon. Friend give way?

Mr. Shore: Not for a moment. I want to develop the point further.
I find the provision in article 107 extraordinary. My hon. Friends find it difficult to cope with. They know that it is wrong. They know that such a separation is unacceptable to them because they have intellectual honesty. They know that they cannot accept it because it is intolerable and ridiculous to hand such power to independent bankers. They have to continue pretending that it is a mistake—perhaps a misprint in the text. We heard some of that today.
My hon. Friends have a considerable record in saying that they would never accept a provision such as article 107. The famous document "Meet the Challenge: Make the Change" did not acknowledge the concept of economic and monetary union. It dealt mainly with the exchange rate mechanism. My hon. Friends may say that that was in 1989. What about 1990? Another document went to annual conference then and received whatever approval one obtains there. It said:
premature monetary union would damage Britain… The bank, which will be responsible for the day-to-day management of monetary policy, should be statutorily accountable to ECOFIN for meeting its monetary objectives.
The principle was stated with clarity.
A similar pledge was made in a later document in 1991. Those were the policy statements of the Labour party up to the 1991 annual conference, the last before the election. We still maintained that it would be intolerable to have a European central bank which was not controlled by a powerful ECOFIN. Now things have changed. Things were slipped out of the national executive and joint meetings of the shadow Cabinet and the national executive in the run-up to the election.
As we know, there was no further annual conference, so the new absurdity is that, apparently, at its last annual meeting, the party agreed to accept it on the ground that it was the best thing we could get. However, it is a major change from the commitments of the past three years. I well understand that my hon. Friends feel uneasy and that leads them to make assumptions about the treaty that are far from the truth.
I do not wish to subject to detailed criticism the proposition that we need a powerful ECOFIN to control the otherwise independent bank, but let us take it at face value. Do we want that?
The treaty contains the opposite of what we want, with all the entrenched authority of a treaty commitment. Some of my hon. Friends say that it simply requires political will, with a powerful new Labour Government storming into Brussels and saying, "We want ECOFIN. We want to bring that great institution under our control." I do not know who they would find as their allies in that task. I am afraid that there will be no French socialist Government available in the next few years. I do not think that there will be a French socialist President for very much longer, so we will find no allies there. According to all accounts, even when we had those allies they were not very successful in getting their way with the other partners in the European Community.

Mr. Marlow: It is worse than the right hon. Gentleman says. It would not matter if that exciting, new, dynamic Labour Government were to rush across to Brussels with

those ideas. The Commission would have to propose and the European Parliament would have to agree before any changes could be introduced.

Mr. Shore: Indeed, there are many complications. The basic point is that there has been no evidence whatsoever of any substantial body of opinion in the Governments of the present member states in favour of a powerful ECOFIN to which the European central bank is to be made responsible. It simply is not there. Instead, we have the overriding view of the Germans—and it is above all a German institution. As the Germans are deeply afraid of inflation following their appalling experience in the 1920s, we have the most anti-inflationary structure for the bank and the greatest independence for it written into the treaty, in contrast to the wishes of my hon. Friends.
What we have heard from the Labour Front Bench and from a number of Back Benchers is simply wishful thinking. They want it to happen, but it is not there. The opposite is there and they cannot deny it.
We had a reminder of the absurdities and costs of the common agricultural policy. When something is in a treaty—the CAP is in the treaty of Rome—and buttressed by regulations, it takes a great deal to get rid of it.
As long as I have been in politics we have been reforming the common agricultural policy. What about the Mansholt plan? Remember him? Great things were to come from that. There have been wonderful arrangements every decade. We have come back in triumph from negotiations saying that at least we shall put an end to the surpluses, the wine lakes and so on. What has happened? Where are we? We still have the CAP; it is jeered at and laughed at throughout the world, except where it causes considerable pain because it is protectionist and does such damage. It is an absurdity of a policy, but it remains.
When something is written into a European treaty, it takes almost an earthquake to get it out agin, so my hon. Friends should not pretend that there is no substance, weight or authority in what is written into the text of a treaty. Unless they are prepared to face that fact, they are not doing much credit to themselves or to any serious discussion of what is involved.

Mr. Enright: I am very grateful to my right hon. Friend for giving way yet again, but may I remind him that it was during the tenure of his Government and his Government's negotiations—[HON. MEMBERS: "Ours."] I was certainly in the party at that time and I supported the party, but I was not, alas, a member of the Government. It was a Government of which my right hon. Friend was a member which negotiated access to the sugar market for British sugar beet farmers, resulting in huge excesses of sugar which continue today, to the detriment of the third world. I deplored it then, and I deplore it now.

The Chairman: Order. I do not think that we need develop an argument on sugar. We are discussing the central bank.

Mr. Shore: My hon. Friend has not, frankly, recorded accurately the history of those years.
I was going on to deal with the desperate plight of my hon. Friends in trying to prove that ECOFIN will be in charge of the European central bank. They are in great difficulties. When they have reached the end of their tether, as it were, when the last possible argument has been produced and dismissed by better information, what do


they say? It is fascinating. They say that we may be right, but that it really does not matter anyway because we have no freedom with our interest rates and exchange rate, that we are dominated by the Germans—we have heard this from all sides—or the Americans or whatever. It really does not matter, they say, that we are transferring one of the great instruments of macro-economic policy to an unelected, unaccountable institution in Europe. We are transferring the power to set our own interest rates and our own exchange rate, and they say that it does not matter. It is not just recently that they have been saying it; they have been saying for the past couple of years that we will have no power over our own interest rates and our own exchange rate.
We know what the answer to that is. Some members of the Government may have shared that view at some stage, but events are a marvellous tutor, and the events on what some hon. Gentlemen call "white Wednesday" in September 1992 showed us that there is a freedom. It is not, of course, a freedom to lower one's interest rates to the point of oblivion. We cannot go right down from 10 per cent., I think it was, before we added the 5 on the fatal day, to 3 per cent., because there are world factors and influences to be taken into account. But there is a big difference between being, as we were on 13 September, 2 per cent. higher than German interest rates and being, as we are today, at least 2 per cent. lower than German interest rates. That is quite a margin of freedom.
If anyone doubts it, let him talk to British industries, which are now borrowing money at much better rates than they were able to do six or nine months ago, and ask whether they would prefer to be a firm in France, where the bank rate is not 6 per cent. but 12 per cent., holding the "franc fort", looking the deutschmark in the face, and accepting for an incredibly long time quite unacceptably high employment, almost the same as our own, 3 million. Frankly, was what happened last Sunday surprising? It should be a lesson for socialists everywhere.

Mr. Gould: My right hon. Friend makes a powerful case, but one can add to it. He will recall that before 16 September we were solemnly assured that withdrawing from the exchange rate mechanism would not give us greater freedom to set our own interest rates and that if we dared to break the arrangement interest rates would have to rise. Does my right hon. Friend recall that advice, and what does he think of it?

Mr. Shore: Yes, I remember hearing that. Undoubtedly, people had that anxiety. I do not think that it was very rational, but, frankly, the Treasury has not been very good at judging or forecasting matters affecting the exchange rate or interest rates.
When we entered the ERM in October 1990, I remember saying—this is not hindsight—that I was convinced that it was the wrong rate; and I am not a great currency expert. From what I could see of the pre-fixed exchange rate and the performance of the British economy, especially in terms of its balance of trade deficit, it seemed self-evident that it was wrong. But the Treasury went ahead, and in written and oral answers to my questions I was assured that the most expert people had been consulted, and different authorities had suggested

that entry was right. I am afraid that they were wrong, and they were also wrong about their estimates of the effects on interest rates and other things of getting the pound out of the ERM.

Mr. Nicholas Winterton: The right hon. Gentleman has referred to the "independence" of the new European central bank, but is he not misguided in using that word? Does he not mean that it is unaccountable? Bearing in mind the huge powers that the bank will have to control the economies of all the countries that comprise the European Community, and given the fact that its policies to deal with and to limit deficits could create massive unemployment in certain parts of the Community, will it not undermine democracy and accountability? As several hon. Members have said, perhaps it will force the people of this country reluctantly to take to the streets to exercise the democratic rights which the body will deny them.

Mr. Shore: The hon. Gentleman is correct. The bank will be both unaccountable and independent.
The political authorities will be totally incapable of influencing the top management of the European central bank. I remind the House that the four executive members of its board and the chairman and vice-chairman are to be appointed for a one-term, eight-year period. Even the most timid people are likely to be very independent in their judgment if they are appointed on such generous terms. One cannot be reappointed, so it is no good sucking up to people or assisting them in any way. The executives are meant to be independent and one could not conceive of any arrangement that could make them more so. That is written into the protocol on the European central bank.
An adjacent matter is also very important. The hon. Member for Macclesfield (Mr. Winterton) was absolutely right: okay, we will have an unaccountable central bank. What are its terms of reference and what has it been asked to do? Article 105 states:
The primary objective of the ESCB"—
European system of central banks—
shall be to maintain price stability.
I do not want to go over all the previous arguments about that, but it is the deflationary heart of the treaty, and it reflects German historical experience and their insistence on those terms of reference before they would agree to the treaty. That clause is very important.
Let me return to article 2, which contains a general statement. I know that the phrase "high unemployment" is used three times in the treaty, because my hon. Friend the Member for Western Isles (Mr. Macdonald) corrected me when I said that it was used only twice. Nobody can possibly say that this is not very important. But the faith of my hon. Friends in article 2 is rather misplaced, for another reason. Article 2 must be read in conjunction with article 3a. I do not know whether hon. Members have had a chance to look at the latter. As it is highly relevant, I shall quote it. Paragraph 1 says:
For the purposes set out in Article 2"—
including high employment and all these other lovely things—
the activities of the Member States and the Community shall include, as provided in this Treaty…the adoption of an economic policy which is based on the close co-ordination of Member States' economic policies".
Paragraph 3 says:


These activities of the Member States and the Community shall entail compliance with the following guiding principles".
What do hon. Members think those guiding principles are? A high level of employment? One looks in vain for that. The principles stated are stable prices, sound public finances and monetary conditions and a sustainable balance of payments. One does not find there much encouragement for those who have pinned their faith on article 2. As I said earlier, we should take article 2 more seriously if there were a 10-page protocol on full employment in the European Community.

Mr. Mandelson: My right hon. Friend is right to draw attention to these provisions. Indeed, I have the page flagged and intended to quote from it if given the opportunity. My right hon. Friend refers to sound public finances and a sustainable balance of payments. Why does that give rise to such horror? Why should we, instead, be in favour of unsound public finances and an unsustainable balance of payments?

Mr. Shore: There is no doubt that a sustainable balance of payments is crucial. However, the factors that are picked out here are ones that curtail employment, rather than help to create it. Nobody, except perhaps the Germans, has ever had stable prices and full employment. Sound public finances mean a public sector borrowing requirement of less than 3 per cent. of gross domestic product. And what are sound monetary conditions? Tight money? Certainly, and monetary discipline. I want to find the things that my hon. Friend the Member for Hartlepool (Mr. Mandelson) would have been delighted to find. If there had been a preference to high employment, would he not have waved his papers in the air and rejoiced? Such a reference would have given a little credibility to his faith in article 2.

Mr. Betts: rose—

Mr. Shore: I shall not give way. I want to come to a conclusion.
These are not very encouraging guiding principles for people concerned with the achievement of high rates of growth and low rates of unemployment.
I want to put to the Minister a question about article 19 of the protocol in respect of the statute of the ESCB. This seems to give the central bank power to demand minimum reserves for banks and other financial institutions. I have not had an explanation of what is entailed. Is the point that, in order to secure what the bank considers to be sound monetary conditions, it could, like the Bank of England in times past, call up deposits from commercial banks, to be non-interest-bearing and frozen as part of a tight money policy? I should be grateful if the Financial Secretary would explain that—not necessarily now, but when he makes his speech.
Article 108 is a simple little article that states:
Each Member State shall ensure, at the latest at the date of the establishment of the ESCB, that its national legislation including the statutes of its national central bank is compatible with this Treaty and the Statute of the ESCB.
My hon. Friend the Member for Oxford, East (Mr. Smith)
will have swallowed hard and put on a brave face when he reached that disagreeable item.
When the Labour majority Government came to power in 1945, the first thing it did—virtually with the assent of the then Opposition—was to place, not just in public ownership but in Treasury control, the Bank of England.

If I can recall one or two of the phrases that we used then, I think that we said that it was to finance the servant, not the master, of the nation. That was the sort of approach that we took, and we meant it. We meant to take over those factors that greatly influenced the lives of our people. I find it difficult to detect any vestige of the socialist tradition in those of my hon. Friends who are cheerfully contemplating handing over the power of democratic control through our democratically elected Government and Chancellor here to an unelected bank in Europe. I think that such an attitude is utterly deplorable, and I hope that the Labour party will rethink what it is doing.
Can anyone envisage the circumstances in which the next Labour Government would come before the House and, in its first Bill, repeal the Bank of England Act 1946 and formally renounce the power to control this country's monetary system? We would die of shame. I am certain that many people in the Labour party would never accept it.

The Financial Secretary to the Treasury (Mr. Stephen Dorrell): The group of amendments addresses the institutional implications of those sections of the treaty which deal with the possibility of the establishment of a single currency. Much of the debate has proceeded on the assumption that there will come into force and apply in this country a European system of central banks which will operate a single currency in this country. I shall return to those arguments later.
First, however, I wish to pick up an issue raised by the right hon. Member for Bethnal Green and Stepney (Mr. Shore). He said that for the debate to proceed on such a basis would be to make a substantial leap of logic. The success of my right hon. Friend the Prime Minister at Maastricht means that the House is not being asked now to accept the proposition that a single currency should be circulating in this country or that the institutions set out in the treaty should come into force to operate that single currency. As a result of the British protocol negotiated by my right hon. Friend the Prime Minister, that decision will be made later. That is not the issue before the House today.

Mr. Andrew Smith: In the light of what the Minister has said, may I ask if he is aware of the article written by the Prime Minister when he was Chancellor of the Exchequer in The Irish Times on 6 July 1990? He wrote:
There is no more important issue facing the European Community than the path we choose towards economic and monetary union. We are all committed to that goal.
Are the Government still committed to that goal?

Mr. Dorrell: The goal of economic and monetary union has been accepted by EC member states since the early 1970s. The issue is the precise form that the union will take. The treaty sets out a form of monetary union and contains the British position on that form—that under the terms of the British protocol we are not bound to introduce a single currency.

Mr. Marlow: If there is monetary union does that not mean that there will be a single currency?

Mr. Dorrell: No. That is precisely why in the run-up to the Maastricht negotiations we proposed not a single currency system but a common currency which within a monetary union would allow a range of different


currencies to circulate. That is why we have not accepted a commitment to a single currency. We do not accept that commitment to monetary union necessarily implies a commitment to introduce a single currency.

Mr. Rowlands: Why in 1993 do we have to write into our domestic legislation all stages 1, 2 and 3 articles and all the protocols? Why not do that in 1996?

Mr. Dorrell: As the Government made clear in another context, in the Bill, as in earlier legislation to introduce treaty obligations to our domestic law, it is more sensible to legislate for all the implications which might arise from the treaty. That lies behind the drafting of the Bill.

Mr. Marlow: rose—

Mr. Dorrell: Perhaps my hon. Friend would allow me to answer the question put to me. It is more sensible to introduce into our legislation the provisions which would be necessary if we exercised the choice provided for by the British protocol. That is in line with the manner in which we have legislated for treaty obligations in the past.

Mr. Spearing: I think that the Minister asserted that the commitment or obligation to economic and monetary union went back to the early 1970s. I do not recall any such commitment in the European Community debates in 1972. My recollection and that of my hon. Friends is that the Government referendum document of 1975 specifically stated that the threat of economic and monetary union had been removed. I do not recall any Conservative denying that. What was the commitment of the early 1970s?

Mr. Dorrell: The amendments concern the institutional arrangements for the operation of a single currency. At the time of the referendum the argument was not that there was no further Community interest in economic and monetary union—that would have been a hard argument to advance—but that if there was to be a decision to introduce economic and monetary union it would require at the very least unanimity in the Council. Any significant move down the road of such union would involve a treaty amendment, which is precisely what we are debating.

Mr. Mandelson: The point about the early 1970s is rather fine and arcane. More relevant is the position of the Prime Minister. For the benefit of those who are following the debate it would be worth clarifying the answer the Minister gave to my hon. Friend the Member for Oxford, East (Mr. Smith), who quoted from an article in The Irish Times of Friday 6 July written by the then Chancellor of the Exchequer, now the Prime Minister:
There is no more important issue facing the European Community than the path we choose towards economic and monetary union. We are all committed to that goal.
The Minister says that that is enshrined in the Maastricht treaty, but the Government take a separate position within the treaty. Presumably the Prime Minister has changed the view that he expressed in 1990—or does he now hold a minority position in his own Government?

Mr. Dorrell: I did not say that the position was set out only in the Maastricht treaty. I said that we accept the commitment to economic and monetary union, to which this country has signed up several times—including in the early 1970s. We do not accept that the only way to deliver monetary union in Europe is by introducing a single

currency. That is why my right hon. and noble Friend Lord Lawson, who is not a supporter of a single currency, proposed to the Community that we should introduce provision for a common currency regime which would allow currencies to circulate within the Community on the basis of a monyetary union, but without the introduction—and certainly without the imposition—of a single currency. There is no inconsistency about that.

Mr. Budgen: Can my hon. Friend say whether the Government are committed to moving back into a system of irrevocably locked exchange rates?

Mr. Dorrell: My hon. Friend does not accurately describe either the history or the present commitment involved in the exchange rate mechanism. It is true that it is Government policy to return to membership of the exchange rate mechanism when the Government believe that it is in this country's interest to do so.

Mr. Budgen: Are we committed to going back to irrevocably locked exchange rates?

Mr. Dorrell: The answer is no. I understood my hon. Friend to ask whether we are committed to returning to ERM membership when it is in this country's interest to do so. The answer to that question is yes.

Mr. Marlow: My hon. Friend the Minister said that we are committed to economic and monetary union but that that does not necessarily mean to a single currency—but if one examines the treaty, the only option is a single currency. The Government are committed to the treaty and to economic and monetary union. How can there be economic and monetary union at a later stage without the treaty having a single currency? What alternative is available to the Government?

Mr. Dorrell: I explained twice the Government's preferred option in terms of a route to monetary union.

Mr. Marlow: But that is not in the treaty.

Mr. Dorrell: It is not in the treaty, but neither is any obligation to join a single currency in the treaty. It contains commitments for this country, but a commitment to join a single currency is not numbered among them.
I was asked to give chapter and verse on the commitment in the early 1970s to economic and monetary union. Member states signed up to that at their conference in Paris between 19 and 21 October 1972.

Mr. Leighton: The Minister mentioned Britain's commitment in the early 1970s to economic and monetary union and the referendum. The 1975 manifesto of the Government of the day stated:
There was a threat to employment in Britain from the movement in the Common Market towards an Economic and Monetary Union. This could have forced us to accept fixed exchange rates for the pound, restricting industrial growth and so putting jobs at risk. This threat has been removed.

Mr. Dorrell: As I have already pointed out, I do not feel responsible for that Government in a collective sense. The position in 1975—it remains the same now—was that no form of monetary union could be imposed on the country other than as a result of a treaty amendment, which would clearly require the consent not merely of the Government but of the House in the context of debates such as this.

Mr. Budgen: Will my hon. Friend give way?

Mr. Dorrell: I should like to make some progress on the question which has provided the substance of the debate—the institutional arrangements which would be necessary if we moved to a single currency.
The question which underlies the Bill is this. Other sovereign countries in Europe have expressed an interest—some, indeed, have gone well beyond that—in introducing a single currency as the means of delivering our collective commitment to monetary union. The question that we in Britain must answer is whether, when other member states of the Community are choosing to take that course, we should repeat the mistake—as I regard it—that our forefathers made at the time of the Messina conference. Should we stand out from the process in which those member states are engaged—the designing of a single currency—or take advantage of the opportunity that my right hon. Friend the Prime Minister won for this country at Maastricht, which sets this process apart from the process started at Messina, and assist in the design of a single currency which may come into force in the rest of the Community?
That is the question that the House must decide. The question is not, "Do we want to accept a single currency?" and still less, "Do we want to accept the institutional arrangements set out in the treaty?" Those are questions to which the House will return as a result of the passage of the Bill. The question with which we have to deal tonight is whether, if there is to be a single currency, the arrangements set out in the Bill are sensible for the management of such a currency, which would circulate in 12 independent member states.

Mr. Budgen: My hon. Friend has raised the question of the common currency. Does he agree that, if it is our long-standing wish to move towards economic and monetary union, a common currency can only be a delaying mechanism? Does he agree that, if we are to honour the ultimate obligation, such a currency must lead to a single currency, which is the necessary condition for monetary union?

Mr. Dorrell: Let me say for the third time—in what has been, so far at least, a relatively short speech—that I do not accept that proposition. I continue to believe that a different route for the delivery of monetary union would involve the circulation within the Community of common, as opposed to single, currencies.

Mr. Macdonald: Will the Minister give way?

Mr. Dorrell: No, I want to move on.
Let me return to the subject which has provided the purpose of the debate and answer the question whether the institutional arrangements set out in the treaty are sensible for the management of a single currency. We must at least allow the possibility that a single currency will be introduced. The right hon. Member for Bethnal Green and Stepney made it abundantly clear—as, indeed, did my hon. Friend the Member for East Lindsey (Sir P. Tapsell) and one or two others—that he was against the establishment of a single currency, however managed. If that is the basis on which the discussion is to take place, it will be a wholly academic discussion.
If we are to pursue the argument about what the institutional arrangements could be if a single currency were established—if we chose to join such a currency at a later date, as a result of the opportunity provided for us by

my right hon. Friend the Prime Minister at Maastricht—let us examine what the arrangements could be for the management of that currency.
12 midnight
From the point of view of our history, we are starting with a relatively clean sheet of paper. If we are to answer the question, how do we best manage a single currency starting from a clean sheet of paper, we would do well to set out a few trig points for the argument, as I shall do now.
The first proposition is self-evident. If there is to be a single currency which circulates in the 12 member states of the Community, we have to set up not only the single currency but the monetary authority which will be responsible for managing that single currency. The second proposition is that, if it is to circulate in 12 sovereign member states, that monetary authority—[HON. MEMBERS: "They will no longer be sovereign states."] My hon. Friends may have a view about that.
If the currency is to circulate in the 12 member states of the Community and as there can be only one monetary authority, it follows as night follows day that that monetary authority must be separate from the political institutions of any individual member state. No member state will accept a currency in circulation within its borders which is managed by institutions within the body politic of a different member state. We therefore have to design a monetary authority which is separate from the member states.
My third proposition is that, even when we are designing a monetary authority which is separate from the member states, we should seek to apply the principle of subsidiarity. If monetary authority is to be removed from member states and passed to a single monetary authority, it does not follow that other economic decision-making needs to be removed from the member state level. To manage a single currency across 12 member states, it is certainly necessary to take monetary authority away from member states, but I do not accept that it is necessary or, indeed, desirable, within the principle of subsidiarity, to remove fiscal policy or wider economic policy responsibility from member states.

Mr. John Wilkinson: rose—

Mr. Dorrell: I wish to develop this point; then I will give way to my hon. Friend.
This is one of the fundamental disagreements that If have with my hon. Friend the Member for East Lindsey and the right hon. Member for Chesterfield (Mr. Benn) who argue that, if there is to be a single monetary authority, it follows that it must have responsibility for fiscal policy decisions all around the Community. I do not accept that that is technically necessary. At a technical level, it is simply wrong and certainly not provided for within the treaty.
The treaty provides limits, which we shall discuss on a later group of amendments, to the range of policy options open to member states as fiscal authorities—that is where the budget deficit criteria comes into play—but it does not remove from member states the responsibility for fiscal policy. That rests with member states. If there is to be a single currency, the only aspect of economic policy which it is necessary to remove from member states is responsibility for monetary policy.

Mr. Wilkinson: How on earth, in the real world, could it be possible to have a single monetary authority conducting monetary policy on behalf of the union while the constituent elements of the union pursue their independent fiscal policy? Surely that is a recipe for total economic confusion.

Mr. Dorrell: With great respect, I do not think that that is true. It is wrong at a technical level. [Interruption.] One of my hon. Friends queries my use of the word "technical". The conduct of monetary policy is, in large measure, a technical matter. There is the question of accountability, of course, with which I shall deal in a moment, but if the technical questions are not right, monetary policy will not work.
It is a technically wrong proposition to say that monetary and fiscal policy must be exercised by the same authority. Indeed, it is demonstrably untrue, because there are many examples around the world of different parts of the institutions of a nation state operating fiscal and monetary policy.

Mr. Denzil Davies: The Minister protests too much. Nobody—certainly no Opposition Member—has ever said that the whole of fiscal policy is to be put in the hands of the monetary authorities, or of the bank. The point is that fiscal policy will be partly controlled by the Commission and the Council of Ministers. Fiscal policy on public expenditure, in terms of the ceilings, will be shared with—or partly controlled by, or whatever language one wishes to use—the Commission and ultimately the Council of Ministers. So there is also a transfer of fiscal policy—or of control over some of it—to Community institutions.

Mr. Dorrell: I said in terms that I acknowledged that there was an inhibition on the freedom of manoeuvre of independent nation states, arising from the budget deficit criteria. But the right hon. Gentleman is wrong to say that nobody has suggested during the debate that the consequence of moving to a single currency would be that fiscal policy would become the responsibility of the central bankers. That is exactly the proposition that the right hon. Member for Chesterfield argued at some length—and he is wrong.
It follows from what I have been saying—

Mr. Austin Mitchell: rose—

Mr. Dorrell: I want to make a bit more progress now. It follows from what I have said that it is proposed that the monetary authority be separate from the fiscal authority. We in this country are not familiar with that proposition. We know that our institutions have for some time operated on the premise that my right hon. Friend the Chancellor of the Exchequer is responsible to the House, at this Dispatch Box, for the conduct of both fiscal and monetary policy. If we are designing institutions which could work, and which open for us the choice of a single currency circulating at a later date, we must recognise that that choice is no longer open to us.
If we are designing new institutions which would work and which would allow us to have that choice—a single currency operating within 12 member states—it would be sensible for us to learn from the experience of countries elsewhere in the world which operate fiscal and monetary policy through different institutional arrangements. That is why I make no apology to the Committee for the fact that the European system of central banks looks

remarkably like an institution with which many hon. Members are familiar—the Bundesbank. It is no surprise that the ESCB looks like the Bundesbank: there has been a conscious attempt to learn from the experience of a Community member state which has different authorities for fiscal and monetary policy and which, if we examine its record dispassionately, we see has been relatively successful in the conduct of its economic policy.
That is why, under the arrangements for the ESCB set out in the treaty, the executive board and the governing council and its responsibility to the individual national central banks are reminiscent of the arrangements within the Bundesbank. It is also why article 107, about which there has been substantial debate, is reminiscent of the conditions surrounding the operation of the Bundesbank.

Mr. Gill: Will my hon. Friend give way?

Mr. Dorrell: I want to make a couple of points about article 107, but first I will give way to my hon. Friend.

Mr. Gill: If my hon. Friend thinks that the Bundesbank is such a shining example to us all, will he tell us why we have not emulated that example before? Secondly, may I remind him of the question that I asked earlier about the irony of the fact that the Government do not support an independent Bank of England, yet are prepared to support an independent central bank?

Mr. Dorrell: My hon. Friend's first question is put to us regularly. We make it clear that within our own national arrangements the important issue is to tackle the substance of the management of monetary policy, not the institutional arrangements. In the end, it does not matter whether responsibility rests with the Chancellor or with a governing council institution within the Bank of England. The important issue on monetary policy is the conduct of that policy. I am asking the Committee to consider how, if we wanted to follow up the choice that my right hon. Friend the Prime Minister negotiated for us at Maastricht, we would envisage a single currency being managed within the European Community. Present arrangements for the management of monetary policy in this country, as in every other member state of the Community, would necessarily have to be changed if we were to adopt that approach.

Mr. Malcolm Bruce: If we are even to give ourselves the option to move towards signing up for European monetary union—and allowing for the fact that the Government have kept their options open—would it not be logical and sensible to move now towards establishing an independent Bank of England so as to make the final transition that much easier and our understanding of how the arrangements work that much better?

Mr. Dorrell: I do not accept that. Unless and until we decide that we want to move to a single currency, our energies would be better absorbed using our existing institutions, which work perfectly well at a national level, to conduct monetary policy in order to deliver our substantial policy objectives.

Mr. Andrew Smith: If I heard the Minister right, he said that whether monetary policy was under the control of the Treasury or the central council of the Bank was a matter of indifference, and that the important thing was the conduct of that policy. If that is a matter of such indifference, and if the Government are to honour their


implicit obligations in article 109j(1)—from which the United Kingdom is not exempt under the opt-out and under which the compatibility of the statutes of our central bank with the provisions of the treaty is to be assessed—are they not under an obligation to introduce legislation to change the Bank's statutes? And when will they decide whether to do that?

Mr. Dorrell: Neither we nor any other member state are under any obligation to change our domestic monetary arrangements, except in the context of a move to stage 3. If we do not intend to move to stage 3—or until we decide that we intend to move to stage 3—I am not in favour of changing the arrangements that we have, which work perfectly well. The burden of proof is on those who argue that institutions need to be changed. I do not think that the case for change in our institutional arrangements is made.
One or two of the points made about article 107 are not borne out by the provision itself. It is important to stress that, although it is certainly true that the European central bank and the national central banks are prevented from taking instructions from Community institutions or bodies, from any Government of a member state or from any other body—in other words, they are accountable for their own decisions and cannot take instructions from an outside body—it is not true that the second half of the article prevents the House, or newspaper journalists, or any other interested parties, from expressing their view about the conduct of monetary policy by the European central bank.
The second half of the question addresses only Community institutions and bodies and Governments of the member states. Those two groups forswear the opportunity to influence members of the board of the European central bank, but they are a relatively narrow group of people; anyone else is free, under the provisions of article 107, to express views about the conduct of monetary policy by the European central bank. That includes this House. [Interruption.] I shall deal with the question of the proper accountability arrangements of the bank in a moment.

Mr. Austin Mitchell: The Minister is reducing this House to the level of The Sun or Scallywag in saying that it has the right to give its opinion—big deal.

Mr. Dorrell: I am merely pointing out that those who have argued that article 107 prevents hon. Members expressing their view on the conduct of monetary policy by the European central bank are wrong. The article does not do that.
12.15 am
The right hon. Member for Bethnal Green and Stepney argued that the provisions for the independence of the central bank were a major departure from anything seen before. They are very similar indeed to the arrangements for the independence of the members of the Commission which were introduced by the treaty of Rome, which says:
Members of the Commission, in the performance of these duties, shall neither seek nor take instructions from any Government or any other body
and it provides that
Member States undertake to respect this principle and not to seek to influence Members of the Commission in the performance of their tasks.
So it is not true to say that the independence provisions of the treaty of Maastricht are a significant departure.

Mr. Shore: There is a real difference between one eight-year term not to be renewed and five-year terms for Commissioners, who are eligible for renewal and who hope to be renewed.

Mr. Dorrell: There is a difference, though I am not sure that I would accept the description of it as a big one. I do not deny that the central bank is set up to be independent and that the provisions are designed to ensure its independence, and I shall discuss how accountability is to be delivered in the context of those independence provisions.

Mr. Marlow: In relation to article 107, my hon. Friend said that the House could express its view and opinion. If there is a debate here and he is standing at the Dispatch Box putting the Government's point of view, how will he be able to respond to the debate? What views will he be able to put to the House? How will he be able to take account of the views of hon. Members? What will he be able to say? The answer is nothing. Article 107 says that he cannot say anything.

Mr. Dorrell: It is flattering to hear my hon. Friend ascribe such importance to the views expressed from this Dispatch Box. I hope that he will feel persuaded to follow the weight of my argument tonight, as he implies he would at a later date in relation to questions about monetary policy.
The arrangements for the accountability of the central bank are set out in two places in the treaty. One is in article 109b, which provides arrangements very similar to those which prevail within the Bundesbank—that members of the Council can attend and argue their case but cannot vote within the governing council of the bank, that the bank in turn will be invited to participate in Council meetings and that the central bank will produce
an annual report on the activities of the ESCB and on the monetary policy of both the previous and current year to the European Parliament, the Council and the Commission, and also to the European Council.
That refers to the Heads of State and Government meeting on a six-monthly basis. It goes on:
The President of the ESCB shall present this report to the Council and to the European Parliament".
Those are the institutional arrangements for reporting set out in that article of the treaty.
In addition, and of some significance in view of recent events in this country, are the arrangements set out on page 94 in article 15 of the ESCB protocol. That article sets out extensive requirements for the ESCB to publish reports on its activities. It requires:
A consolidated financial statement of the ESCB shall be published each week
and it states that it must draw up and publish reports on its activities quarterly, with an annual report being made in the way I described. That is of some significance, particularly in view of the arrangements that the Chancellor has set up for the conduct of monetary policy in this country. He has placed great stress on the importance of providing information to those who operate in the market, or comment on the market in the newspapers, and people who are interested in such affairs so that they can see on a regular basis the information against which money policy decisions are made. The same arrangements are provided in this treaty in the context of the European central bank.

Mr. Alex Salmond: The Minister would show more conviction if he openly admitted that this House will lose a range of powers in the future. Some of us think that it is a cracking good idea. Does he accept that in the future, the influence of this House on aspects of monetary policy and the central bank will be roughly equivalent to, say, that which the Scottish Grand Committee has on fiscal policy in Scotland at present?

Mr. Dorrell: I do not know whether the hon. Gentleman was in the Chamber when I started my speech, but I made it clear that if there is a single currency which circulates in 12 member states of the Community it follows, as night follows day, that the existing monetary arrangements within the member states would lose some of the power that they have at present. That is the choice that the House will be asked to make when it decides to join a single currency. It is not being asked to make that choice now.

Mr. Andrew Smith: When I asked the Minister a question relating to article 109j(1), he said that there was no obligation for the United Kingdom to move towards the independence of the central bank until the third stage. I draw his attention to article 109e(5), which clearly states:
During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank".
When will the Government take a decision on that?

Mr. Dorrell: I did not say that we had no obligation to introduce an independent central bank until we had moved to a single currency. I said that we were not obliged to do so unless and until we decided that we wished to move to a single currency. That is the position.

Mr. Hain: If amendment No. 36 were put to the vote and carried, would that prevent the Government from ratifying the treaty, in the light of the Attorney-General's guidance on amendment No. 27? As amendment No. 27 related to opting out of the social chapter, so the British Government have opted out of stage 3 of monetary union, which this debate and the amendment specifically address.

Mr. Dorrell: I made it clear that we have introduced a Bill which gives effect to all the provisions necessary to the exercise of either discretion on the question of a single currency. The Bill makes provision which will work if the United Kingdom chooses to adopt the single currency or if it chooses not to adopt the single currency.
The arrangements that I have described have been referred to by more than one hon. Member in the debate as a bankers' Europe, making provision for the conduct of monetary policy to be unaccountable and conducted by central bankers in a way which is contrary to the interests of working people throughout the Community. Today and in an earlier debate on this subject, my hon. Friend the Member for East Lindsey asked why, even if we have a single currency—

Mr. Hain: On a point of order, Dame Janet. I regret having to raise a point of order, but I ask for your guidance on this point. I asked the Minister a specific question about legal advice from the Attorney-General on amendment No. 36. During previous debates in Committee on this Bill, we were promised that advice, but that point has not been answered. Could you give some guidance as to whether that point should be answered because we might be required to vote on it shortly?

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes): Such matters of substance are not a matter for the Chair.

Mr. Dorrell: In conclusion, I return to the basic point. This evening, the Committee is not being asked to give the green light to a single currency. The decisions that the Committee is making in the context of this Bill have no consequences for the independence of the Bank of England, for parliamentary control of our existing monetary policy arrangements or, as the right hon. Member for Chesterfield argued, for the Conservative tradition of a strong and free United Kingdom or, indeed, the Labour party tradition, which he identified as standing against the interests of capital.
The day may come when the House is asked to decide to adopt a single currency, with the institutional arrangements that I have described, but we are not at that day now. If we decided to go to stage 3 we would have to consider the issue of an independent central bank under the arrangements that I have described. We would also have to establish to our satisfaction our own procedures for making those arrangements accountable.
Today's isssue is much simpler. Is this a sensible arrangement for the management of a single currency, if we chose to adopt one? I believe that is, and on that basis I do not want to see amendments incorporated into the Bill which would make those arrangements unworkable.

Mr. Hain: The debates on this and the next two groupings of amendments deal with the guts of the treaty—its economic framework. The reason why I am so critical of the treaty is that the economic framework, specifically in terms of establishing an unaccountable central bank, is bad for our economy and society.
When one examines the origins of the proposal to establish a central bank, one finds that it was framed during the high tide of monetarism in the 1980s, when European policy makers hatched the idea of the independent European central bank. The hon. Member for East Lindsey (Sir P. Tapsell) took us back to an earlier genesis of the idea in the late 1930s. I shall not follow him in that.
When the proposal for a European central bank was hatched, the political situation was entirely different. The intellectual fashion was for monetarist ideas. The independent central bank was an example of that. It will be the driving force behind Maastricht. It will drive Europe uncompromisingly towards monetary union and enforce price and interest rate stability, virtually regardless of the consequences for employment, redistribution and public welfare, all of which would be entirely secondary matters for the all-powerful bank.
We have seen that that monetarist vision is deeply flawed. It has been rejected in America and I am sure that it will soon be rejected here in Britain. It should be rejected in Europe, too. In that sense, the economic framework of the Maastricht treaty is severely out of date. It was out of date even before the ink had dried on it.
Massive changes have occurred since the original economic programme for Maastricht was framed. For example, we have seen the reunification of Germany and massive deflation has been imposed across Europe. Unemployment is rising continuously. It now stands at some 18 million to 19 million across the European Community. If present trends continue, according to the


Organisation for Economic Co-operation and Development, that total will reach 30 million, with all the awful prospects that that holds for us. In addition, the ERM has imploded. All those factors have created an entirely new situation which should have been recognised. It requires a renegotiation of the treaty's economic framework, especially the establishment of an independent central bank.

Mr. Nicholas Winterton: I am following the hon. Gentleman's speech closely and I find myself in considerable agreement with it. He has just come on to the establishment of an independent European central bank. Bearing in mind the control that that bank will have and the criteria on which it will operate, will not it produce massive unemployment throughout the European Community? In the absence of any accountability, will not it create social unrest which most of Europe, and certainly the United Kingdom, has seldom, if ever, experienced?

Mr. Hain: Indeed. I was about to deal with that point. The bank to which the hon. Gentleman refers was due to be established as part of the final stage 3 transition to monetary union and a single currency. That is why I raised the question that the Minister failed to answer on amendment No. 36. I take his failure to answer directly as confirmation of the fact that if amendment No. 36 were carried the ratification of the treaty would not be affected. We have to assume that because the Minister has not denied it.
Under article 3a the primary objective is
to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Community, in accordance with the principle of an open market economy with free competition.
These activities of the Member States and the Community shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.
There is absolutely no mention of full employment policies.
12.30 am
Nobody has disputed the fact that this is the most important article in the treaty. It is far more important than article 2 to which some of my hon. Friends constantly refer and which I call the apple pie and motherhood article. It is full of nice, generous phrases, but is virtually meaningless when measured up to the specific targets and policies which are carefully prescribed in subsequent articles and specified exactly in article 3a.

Mr. Mandelson: Why are the parts of the treaty that my hon. Friend likes and is fond of quoting so much more meaningful than the articles to which his hon. Friends refer? Why are high employment, high living standards and growth, so hollow and meaningless whereas what he likes is so full of meaning and portent for the future of Europe? I do not understand it.

Mr. Hain: Let me explain to the hon. Gentleman why he should understand it and ask him to restrain the sharpness of his tongue. If he reads the article and compares the specific references in article 3a to price stability and so forth to the rather general phrases in article 2, he will see that the latter are apple pie and motherhood phrases about full employment and welfare,

to which we can all subscribe but which are specifically denied by article 3 and all the subsequent articles that I am about to quote to him.

Mr. Rowlands: Will my hon. Friend draw attention to the primary objectives in article 5 on the ESCB? While article 2 is
with a view to contributing to the achievement",
article 3 requires compliance. The language is totally different. One involves compliance while the other is a general objective.

Mr. Hain: Indeed. My hon. Friend makes a convincing point. It is the central flaw in the views of those who are turning a blind eye to the real content of the treaty, as the hon. Member for Hartlepool (Mr. Mandelson) is inviting us to do. He wants us to salute the general phrases and the nice, rolling words of the treaty, but he wishes us to ignore the specifics which ultimately require legal compliance, despite their hugely deflationary consequences. I consider that irresponsible because it will have enormous consequences not only for my constituents in an outlying region of Britain, but for his constituents who also live in an outlying region, especially in relation to the hub of the European Community where all decisions will be made and where power will be centralised.

Mr. Mandelson: Talking about sharpness, I do not need to take any lectures from hon. Friends about the effectiveness with which I represent my constituents.
May I just ask my hon. Friend two things? Why is it that article 2, the first substantial article of the entire treaty, which starts with the words
The Community shall have as its task"—
I will not read the rest of it because it is familiar—is so meaningless? Secondly, why—after all, my hon. Friend raised article 3a—does not he subscribe to this categorical and clear statement which I should have thought would enjoy the support of all Opposition Members:
the adoption of an economic policy which is based on the close co-ordination of Member States' economic policies, on the internal market and on the definition of common objectives"?
What is so commonly objectionable about that? I should have thought that it echoed precisely Labour party statements and our manifesto at the last general election.

Mr. Hain: There is nothing commonly objectionable about it at all. No hon. Member could object to those fine and rolling words.

Mr. Mandelson: My hon. Friend is choosing to ignore them.

Mr. Hain: No, I am not choosing to ignore them at all. What I am pointing out to the hon. Member and to other hon. Members, if they care to listen, is that one can start off a treaty with all sorts of fine words, but when it comes to the implementation of that treaty—

Mr. Mandelson: My hon. Friend is ducking and weaving.

Mr. Hain: No, it is not a question of ducking and weaving and picking and choosing—[Interruption.]

The Second Deputy Chairman: Order. We cannot have a sub-conversation going on. The hon. Member for Hartlepool (Mr. Mandelson) has had a number of opportunities to intervene. When he is not intervening, he must keep quiet.

Mr. Hain: I am grateful, Dame Janet. Could I just emphasise that it is not a question of picking and choosing or ducking and weaving but of looking objectively at the treaty and at those instruments, one of which is specified in article 3a, the principal one of price stability, an objective which nothing must compromise. One then has to measure up those specific instruments against the woolliness of the earlier phrases and the fine words that we can all salute and subscribe to.

Mr. Leighton: In relation to what my hon. Friend has called the apple pie and motherhood clause, with these woolly words, is it not a fact that similar words also occur in the treaty of Rome? But what has been the result of that? Why is it, if we have such nice words in the treaty, that we have 18 million to 19 million workers unemployed? Is not it true that, despite having those nice words in the treaty of Rome, the Community has become the unemployment black spot of the world, and that this would make it worse?

Mr. Hain: Without going into the treaty of Rome, I think that my hon. Friend's point about the European Community becoming the unemployment blackspot of the world is valid. The average unemployment rate in the EC has now outstripped that in the Organisation for Economic Co-operation and Development, whereas it used to be below it. One must ask why. The answer is clear. What we have had in the past few years is a dress rehearsal for precisely the kind of deflationary, monetarist policies which Maastricht celebrates and institutionalises and which will cause mass unemployment and further deflation across Europe.

Sir Teddy Taylor: rose—

Mr. Hain: I would like to make progress, if the hon. Member does not mind, but I shall be happy to give way later.
Under this treaty the European central bank will be an independent institution. It will be required, as article 3a specifies, to be single-mindedly dedicated to low inflation, virtually regardless of the consequences for employment and social equality. That is the key point. It is specified that national central banks will be subordinated to the unaccountable European central bank and not to their elected Governments—a point which has recurred in contributions to this debate. It will be specifically prevented from being accountable to the elected national Governments. If the timetable is strictly adhered to, the Bank of England would have to be privatised, or at least made fully independent, by 1999, as is already happening in France and has just been completed in Spain.
The independence of the European central bank is uncompromisingly spelled out in chapter 2, article 107—another one that I want to quote for the record:
When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ESCB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body.
The Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.
There is not much fudging, or ducking and weaving there—it is crystal clear. Elected Governments and politicians

are barred from influencing the governing body of the European central bank, which is equally obliged to disregard any representations made to them.

Sir Teddy Taylor: I fully agree with that excellent argument. Will the hon. Member remind his very gullible and talkative friend, the hon. Member for Hartlepool (Mr. Mandelson), that many political parties have promoted policies comprising full employment, high wages and lots of sunshine, but those are extremely difficult to achieve if the basic policies inherent in the manifestos are a load of rubbish and if they are deliberately designed to create unemployment and misery?

Mr. Hain: I shall allow the hon. Member for Hartlepool to make his own case in his own way.
Not only does the treaty require—

Mr. James Arbuthnot: rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee proceeded to a Division, and the Second Deputy Chairman having directed that the Doors be locked—

Mr. John Wilkinson: (seated and covered): On a point of order, Dame Janet. You will notice that the Door to one of the Lobbies has been locked whereas the Door to the other one has been left open. We have seen some funny tricks in the Committee, but this is one of the oddest.

The Second Deputy Chairman: I think that it was my fault. I ordered the Doors to be locked in error. I apologise for the mistake. I am sure that the Doorkeepers will open the Doors to allow us to proceed as usual.

Whereupon the Doors were unlocked.

The Committee having divided: Ayes 236, Noes 70.

Division No. 204]
[12.40 am


AYES


Adley, Robert
Browning, Mrs. Angela


Ainsworth, Peter (East Surrey)
Bruce, Malcolm (Gordon)


Aitken, Jonathan
Campbell, Menzies (Fife NE)


Alexander, Richard
Carlile, Alexander (Montgomry)


Alton, David
Carlisle, Kenneth (Lincoln)


Amess, David
Carrington, Matthew


Ancram, Michael
Channon, Rt Hon Paul


Arbuthnot, James
Chapman, Sydney


Arnold, Jacques (Gravesham)
Churchill, Mr


Arnold, Sir Thomas (Hazel Grv)
Clarke, Rt Hon Kenneth (Ruclif)


Ashby, David
Clifton-Brown, Geoffrey


Atkinson, Peter (Hexham)
Coe, Sebastian


Baker, Nicholas (Dorset North)
Congdon, David


Baldry, Tony
Conway, Derek


Banks, Matthew (Southport)
Coombs, Simon (Swindon)


Banks, Robert (Harrogate)
Cope, Rt Hon Sir John


Bates, Michael
Couchman, James


Batiste, Spencer
Currie, Mrs Edwina (S D'by'ire)


Bellingham, Henry
Curry, David (Skipton & Ripon)


Beresford, Sir Paul
Dafis, Cynog


Blackburn, Dr John G.
Davis, David (Boothferry)


Booth, Hartley
Day, Stephen


Boswell, Tim
Deva, Nirj Joseph


Bottomley, Peter (Eltham)
Dorrell, Stephen


Bottomley, Rt Hon Virginia
Douglas-Hamilton, Lord James


Bowden, Andrew
Dover, Den


Bowis, John
Duncan, Alan


Brandreth, Gyles
Dunn, Bob


Brazier, Julian
Durant, Sir Anthony


Bright, Graham
Dykes, Hugh


Brooke, Rt Hon Peter
Eggar, Tim


Brown, M. (Brigg & Cl'thorpes)
Elletson, Harold






Emery, Rt Hon Sir Peter
McLoughlin, Patrick


Evans, Jonathan (Brecon)
Madel, David


Evans, Nigel (Ribble Valley)
Maitland, Lady Olga


Evans, Roger (Monmouth)
Malone, Gerald


Evennett, David
Mans, Keith


Faber, David
Marshall, Sir Michael (Arundel)


Fabricant, Michael
Martin, David (Portsmouth S)


Fenner, Dame Peggy
Mawhinney, Dr Brian


Fishburn, Dudley
Merchant, Piers


Forman, Nigel
Milligan, Stephen


Forsyth, Michael (Stirling)
Mills, Iain


Forth, Eric
Mitchell, Andrew (Gedling)


Foster, Don (Bath)
Mitchell, Sir David (Hants NW)


Fox, Dr Liam (Woodspring)
Monro, Sir Hector


Fox, Sir Marcus (Shipley)
Moss, Malcolm


Freeman, Roger
Needham, Richard


French, Douglas
Nelson, Anthony


Gale, Roger
Neubert, Sir Michael


Gallie, Phil
Newton, Rt Hon Tony


Garel-Jones, Rt Hon Tristan
Nicholls, Patrick


Garnier, Edward
Nicholson, Emma (Devon West)


Gillan, Cheryl
Norris, Steve


Goodson-Wickes, Dr Charles
Onslow, Rt Hon Sir Cranley


Gorst, John
Oppenheim, Phillip


Grant, Sir Anthony (Cambs SW)
Page, Richard


Greenway, John (Ryedale)
Paice, James


Grylls, Sir Michael
Patnick, Irvine


Gummer, Rt Hon John Selwyn
Patten, Rt Hon John


Hague, William
Pattie, Rt Hon Sir Geoffrey


Hamilton, Rt Hon Archie (Epsom)
Peacock, Mrs Elizabeth


Hamilton, Neil (Tatton)
Pickles, Eric


Hampson, Dr Keith
Porter, Barry (Wirral S)


Hanley, Jeremy
Portillo, Rt Hon Michael


Harris, David
Powell, William (Corby)


Haselhurst, Alan
Rathbone, Tim


Hawkins, Nick
Redwood, John


Hayes, Jerry
Renton, Rt Hon Tim


Heald, Oliver
Richards, Rod


Heathcoat-Amory, David
Riddick, Graham


Hendry, Charles
Robathan, Andrew


Hicks, Robert
Roberts, Rt Hon Sir Wyn


Higgins, Rt Hon Sir Terence L.
Robertson, Raymond (Ab'd'n S)


Hill, James (Southampton Test)
Robinson, Mark (Somerton)


Horam, John
Rowe, Andrew (Mid Kent)


Hordern, Rt Hon Sir Peter
Rumbold, Rt Hon Dame Angela


Howarth, Alan (Strat'rd-on-A)
Ryder, Rt Hon Richard


Howell, Rt Hon David (G'dford)
Sackville, Tom


Hughes, Simon (Southwark)
Shaw, David (Dover)


Hunt, Rt Hon David (Wirral W)
Shaw, Sir Giles (Pudsey)


Hunt, Sir John (Ravensbourne)
Shepherd, Colin (Hereford)


Hunter, Andrew
Smith, Tim (Beaconsfield)


Jack, Michael
Soames, Nicholas


Johnston, Sir Russell
Spencer, Sir Derek


Jones, Gwilym (Cardiff N)
Spicer, Sir James (W Dorset)


Jones, Ieuan Wyn (Ynys Môn)
Spink, Dr Robert


Jopling, Rt Hon Michael
Sproat, Iain


Kellett-Bowman, Dame Elaine
Squire, Robin (Hornchurch)


Kennedy, Charles (Ross,C&S)
Stanley, Rt Hon Sir John


Key, Robert
Steel, Rt Hon Sir David


Kilfedder, Sir James
Stephen, Michael


Kirkhope, Timothy
Stern, Michael


Kirkwood, Archy
Stewart, Allan


Knight, Mrs Angela (Erewash)
Streeter, Gary


Knight, Greg (Derby N)
Sykes, John


Knox, David
Taylor, Ian (Esher)


Kynoch, George (Kincardine)
Taylor, Matthew (Truro)


Lait, Mrs Jacqui
Temple-Morris, Peter


Leigh, Edward
Thomason, Roy


Lester, Jim (Broxtowe)
Thompson, Patrick (Norwich N)


Lidington, David
Thornton, Sir Malcolm


Lightbown, David
Thurnham, Peter


Lilley, Rt Hon Peter
Townsend, Cyril D. (Bexl'yh'th)


Lloyd, Peter (Fareham)
Tracey, Richard


Llwyd, Elfyn
Trotter, Neville


Luff, Peter
Twinn, Dr Ian


Lyell, Rt Hon Sir Nicholas
Viggers, Peter


Lynne, Ms Liz
Walden, George


MacGregor, Rt Hon John
Wallace, James


Maclean, David
Waller, Gary


Maclennan, Robert
Wardle, Charles (Bexhill)





Waterson, Nigel
Wolfson, Mark


Wells, Bowen
Wood, Timothy


Wheeler, Rt Hon Sir John
Yeo, Tim


Whitney, Ray
Young, Sir George (Acton)


Whittingdale, John



Widdecombe, Ann
Tellers for the Ayes:


Wigley, Dafydd
Mr. Andrew MacKay and


Willetts, David
Mr. Robert G. Hughes.


NOES


Abbott, Ms Diane
Lawrence, Sir Ivan


Adams, Mrs Irene
Lewis, Terry


Anderson, Ms Janet (Ros'dale)
Lloyd, Tony (Stretford)


Barnes, Harry
McAllion, John


Barron, Kevin
Macdonald, Calum


Beggs, Roy
McMaster, Gordon


Bermingham, Gerald
McWilliam, John


Betts, Clive
Mandelson, Peter


Boyce, Jimmy
Martin, Michael J. (Springburn)


Budgen, Nicholas
Meale, Alan


Campbell-Savours, D. N.
Michael, Alun


Cann, Jamie
Mowlam, Marjorie


Chisholm, Malcolm
Pike, Peter L.


Cran, James
Pope, Greg


Cryer, Bob
Reid, Dr John


Cunliffe, Lawrence
Robertson, George (Hamilton)


Cunningham, Rt Hon Dr John
Ross, William (E Londonderry)


Darling, Alistair
Rowlands, Ted


Davies, Rt Hon Denzil (Llanelli)
Shepherd, Richard (Aldridge)


Davis, Terry (B'ham, H'dge H'l)
Shore, Rt Hon Peter


Dixon, Don
Simpson, Alan


Evans, John (St Helens N)
Skinner, Dennis


Foster, Rt Hon Derek
Smith, Andrew (Oxford E)


Gill, Christopher
Smith, Llew (Blaenau Gwent)


Godman, Dr Norman A.
Spearing, Nigel


Gould, Bryan
Stott, Roger


Griffiths, Nigel (Edinburgh S)
Taylor, Sir Teddy (Southend, E)


Hain, Peter
Walker, Bill (N Tayside)


Hall, Mike
Wilkinson, John


Heppell, John
Winnick, David


Hill, Keith (Streatham)
Winterton, Mrs Ann (Congleton)


Howarth, George (Knowsley N)
Winterton, Nicholas (Macc'f'ld)


Hughes, Kevin (Doncaster N)
Wray, Jimmy


Jessel, Toby



Kennedy, Jane (Lpool Brdgn)
Tellers for the Noes:


Kilfoyle, Peter
Mr. Austin Mitchell and


Knapman, Roger
Mr. Ron Leighton.

Question accordingly agreed to.

Question put accordingly, That the amendment be made:—

The Committee divided: Ayes 48, Noes 234.

Division No. 205]
[12.55 am


AYES


Abbott, Ms Diane
Lawrence, Sir Ivan


Adams, Mrs Irene
Leighton, Ron


Barnes, Harry
Lord, Michael


Beggs, Roy
McAllion, John


Bermingham, Gerald
McWilliam, John


Budgen, Nicholas
Marlow, Tony


Campbell-Savours, D. N.
Martin, Michael J. (Springburn)


Cann, Jamie
Mitchell, Austin (Gt Grimsby)


Cash, William
Reid, Dr John


Chisholm, Malcolm
Ross, William (E Londonderry)


Cran, James
Rowlands, Ted


Davies, Rt Hon Denzil (Llanelli)
Shepherd, Richard (Aldridge)


Davis, Terry (B'ham, H'dge H'l)
Shore, Rt Hon Peter


Gill, Christopher
Simpson, Alan


Godman, Dr Norman A.
Skeet, Sir Trevor


Gould, Bryan
Smith, Llew (Blaenau Gwent)


Griffiths, Nigel (Edinburgh S)
Spearing, Nigel


Hain, Peter
Spicer, Michael (S Worcs)


Hall, Mike
Taylor, Sir Teddy (Southend, E)


Howarth, George (Knowsley N)
Walker, Bill (N Tayside)


Jessel, Toby
Wilkinson, John


Kennedy, Jane (Lpool Brdgn)
Winnick, David


Knapman, Roger
Winterton, Mrs Ann (Congleton)






Winterton, Nicholas (Macc'f'ld)
Tellers for the Ayes:


Wray, Jimmy
Mr. Bob Cryer and



Mr. Dennis Skinner.


NOES


Adley, Robert
Foster, Don (Bath)


Ainsworth, Peter (East Surrey)
Fox, Dr Liam (Woodspring)


Aitken, Jonathan
Fox, Sir Marcus (Shipley)


Alexander, Richard
Freeman, Roger


Alton, David
French, Douglas


Amess, David
Gale, Roger


Ancram, Michael
Gallie, Phil


Arbuthnot, James
Garel-Jones, Rt Hon Tristan


Arnold, Jacques (Gravesham)
Garnier, Edward


Arnold, Sir Thomas (Hazel Grv)
Gillan, Cheryl


Ashby, David
Goodson-Wickes, Dr Charles


Atkinson, Peter (Hexham)
Gorst, John


Baker, Nicholas (Dorset North)
Grant, Sir Anthony (Cambs SW)


Baldry, Tony
Greenway, John (Ryedale)


Banks, Matthew (Southport)
Grylls, Sir Michael


Banks, Robert (Harrogate)
Gummer, Rt Hon John Selwyn


Bates, Michael
Hague, William


Batiste, Spencer
Hamilton, Rt Hon Archie (Epsom)


Bellingham, Henry
Hamilton, Neil (Tatton)


Beresford, Sir Paul
Hampson, Dr Keith


Blackburn, Dr John G.
Hanley, Jeremy


Booth, Hartley
Harris, David


Boswell, Tim
Haselhurst, Alan


Bottomley, Peter (Eltham)
Hawkins, Nick


Bottomley, Rt Hon Virginia
Hayes, Jerry


Bowden, Andrew
Heald, Oliver


Bowis, John
Heathcoat-Amory, David


Brandreth, Gyles
Hendry, Charles


Brazier, Julian
Hicks, Robert


Bright, Graham
Higgins, Rt Hon Sir Terence L.


Brooke, Rt Hon Peter
Hill, James (Southampton Test)


Brown, M. (Brigg & Cl'thorpes)
Horam, John


Browning, Mrs. Angela
Hordern, Rt Hon Sir Peter


Bruce, Malcolm (Gordon)
Howarth, Alan (Strat'rd-on-A)


Burt, Alistair
Howell, Rt Hon David (G'dford)


Campbell, Menzies (Fife NE)
Hughes Robert G. (Harrow W)


Carlile, Alexander (Montgomry)
Hughes, Simon (Southwark)


Carlisle, Kenneth (Lincoln)
Hunt, Rt Hon David (Wirral W)


Carrington, Matthew
Hunt, Sir John (Ravensbourne)


Channon, Rt Hon Paul
Hunter, Andrew


Churchill, Mr
Jack, Michael


Clarke, Rt Hon Kenneth (Ruclif)
Johnston, Sir Russell


Clifton-Brown, Geoffrey
Jones, Gwilym (Cardiff N)


Coe, Sebastian
Jones, Ieuan Wyn (Ynys Môn)


Congdon, David
Jopling, Rt Hon Michael


Conway, Derek
Kellett-Bowman, Dame Elaine


Coombs, Simon (Swindon)
Kennedy, Charles (Ross,C&S)


Cope, Rt Hon Sir John
Key, Robert


Couchman, James
Kilfedder, Sir James


Currie, Mrs Edwina (S D'by'ire)
Kirkhope, Timothy


Curry, David (Skipton & Ripon)
Kirkwood, Archy


Dafis, Cynog
Knight, Mrs Angela (Erewash)


Davis, David (Boothferry)
Knight, Greg (Derby N)


Day, Stephen
Knox, David


Dorrell, Stephen
Kynoch, George (Kincardine)


Douglas-Hamilton, Lord James
Lait, Mrs Jacqui


Dover, Den
Leigh, Edward


Duncan, Alan
Lester, Jim (Broxtowe)


Dunn, Bob
Lidington, David


Durant, Sir Anthony
Lightbown, David


Dykes, Hugh
Lilley, Rt Hon Peter


Eggar, Tim
Lloyd, Peter (Fareham)


Elletson, Harold
Llwyd, Elfyn


Emery, Rt Hon Sir Peter
Luff, Peter


Evans, Jonathan (Brecon)
Lyell, Rt Hon Sir Nicholas


Evans, Nigel (Ribble Valley)
Lynne, Ms Liz


Evans, Roger (Monmouth)
MacGregor, Rt Hon John


Evennett, David
MacKay, Andrew


Faber, David
Maclean, David


Fabricant, Michael
McLoughlin, Patrick


Fenner, Dame Peggy
Madel, David


Fishburn, Dudley
Maitland, Lady Olga


Forman, Nigel
Malone, Gerald


Forsyth, Michael (Stirling)
Mans, Keith


Forth, Eric
Marshall, Sir Michael (Arundel)





Martin, David (Portsmouth S)
Smith, Tim (Beaconsfield)


Mawhinney, Dr Brian
Soames, Nicholas


Merchant, Piers
Spencer, Sir Derek


Milligan, Stephen
Spicer, Sir James (W Dorset)


Mills, Iain
Spink, Dr Robert


Mitchell, Andrew (Gedling)
Sproat, Iain


Mitchell, Sir David (Hants NW)
Squire, Robin (Hornchurch)


Monro, Sir Hector
Stanley, Rt Hon Sir John


Moss, Malcolm
Steel, Rt Hon Sir David


Needham, Richard
Stephen, Michael


Nelson, Anthony
Stern, Michael


Neubert, Sir Michael
Stewart, Allan


Newton, Rt Hon Tony
Streeter, Gary


Nicholls, Patrick
Sykes, John


Nicholson, Emma (Devon West)
Taylor, Ian (Esher)


Norris, Steve
Taylor, Matthew (Truro)


Onslow, Rt Hon Sir Cranley
Temple-Morris, Peter


Oppenheim, Phillip
Thomason, Roy


Page, Richard
Thompson, Patrick (Norwich N)


Paice, James
Thornton, Sir Malcolm


Patnick, Irvine
Thurnham, Peter


Patten, Rt Hon John
Townsend, Cyril D. (Bexl'yh'th)


Pattie, Rt Hon Sir Geoffrey
Tracey, Richard


Peacock, Mrs Elizabeth
Trotter, Neville


Pickles, Eric
Twinn, Dr Ian


Porter, Barry (Wirral S)
Viggers, Peter


Portillo, Rt Hon Michael
Walden, George


Powell, William (Corby)
Wallace, James


Rathbone, Tim
Waller, Gary


Redwood, John
Wardle, Charles (Bexhill)


Renton, Rt Hon Tim
Waterson, Nigel


Richards, Rod
Wells, Bowen


Riddick, Graham
Wheeler, Rt Hon Sir John


Robathan, Andrew
Whitney, Ray


Roberts, Rt Hon Sir Wyn
Widdecombe, Ann


Robertson, Raymond (Ab'd'n S)
Wigley, Dafydd


Robinson, Mark (Somerton)
Willetts, David


Rowe, Andrew (Mid Kent)
Wolfson, Mark


Rumbold, Rt Hon Dame Angela
Yeo, Tim


Ryder, Rt Hon Richard
Young, Sir George (Acton)


Sackville, Tom



Shaw, David (Dover)
Tellers for the Noes:


Shaw, Sir Giles (Pudsey)
Mr. Sydney Chapman and


Shepherd, Colin (Hereford)
Mr. Timothy Wood.

Question accordingly negatived.

Mr. Spearing: On a point of order, Dame Janet. Can you help the House by confirming the rules of order? I understand that my hon. Friend the Member for Neath (Mr. Hain) had been making his speech for about 10 minutes when the closure was moved. Is it the custom of the House for hon. Members, for reasons of courtesy, to wait until the end of a speech before moving the closure, or have you discretion to accept it immediately if you think that sufficient debate has taken place on a matter of this importance?

The Second Deputy Chairman: It is perfectly within the rules for the closure to be moved in the middle of a speech—and, in fact, the hon. Member for Neath (Mr. Hain) had spoken for 15 minutes.

Mr. Cryer: On a point of order, Dame Janet. Would it be in order for documents relevant to the debate to be laid on the Table? It is the custom and practice of Parliament for relevant documents to be made available to hon. Members. I have in mind the document that sets out the deal between the Government and the Liberals, under which the Liberals voted with the Government so that they can get away on Friday to go to a conference at Dunoon or somewhere similar.

The Second Deputy Chairman: If such an agreement exists, it certainly does not have the status of a state paper.

Mr. Winnick: The matters that are due to be debated, some of which have already been debated, are of great political and economic significance. Is it the case that you, Dame Janet, have complete discretion over whether to accept the closure motion? In view of the rumour, which is presumably correct, that the Government intend to debate amendments and new clauses until 1 pm on Thursday, what will be the position of the Chair with regard to closure motions moved by the Government? Surely there should be plenty of time to discuss these issues. The Government should not take the opportunity to run through them all in one night which, judging by the 10 o'clock business motion which they won with the Liberals' support, they intend to do. I hope that those points will be duly taken into account by the Chair.

The Second Deputy Chairman: I do not offer hostages to fortune by speculating on what might or might not be. I deal with situations as they arise.

Mr. Austin Mitchell: On a point of order, Dame Janet. I had tabled eight amendments in the previous group but was not called to speak. That group covered a major issue—the future of the central bank—and was decided in a brief six and a half hours. If, as you said, you have the discretion to turn down a closure motion, may I ask how you are able to consider the matter in the middle of an hon. Member's speech?

The Second Deputy Chairman: I make my own decisions on that and I am confident that I made the correct decision. The role of the Chair is simply to ensure that there is no gross abuse of the rights of the minority. After that, it is for the Committee to decide whether to curtail debate.

Mr. Wilkinson: Further to that point of order, Dame Janet. I would not for a moment question your ruling, which is wholly within the letter of the rules of procedure, but is it in the spirit of this place, which works effectively by agreement, understanding and tolerance, for the Government to move closure motions in the middle of speeches?

The Second Deputy Chairman: I have already explained that it is perfectly within the rules and I do not think that I can make any further observations.

Mr. Skinner: On a point of order, Dame Janet. You may have noticed that, during the past few years, debates have taken place in other parts of the country, for example, in Scotland and Wales. I wonder whether you are prepared to have a word with Madam Speaker about having a series of Maastricht debates in Newbury in the run-up to the by-election? Labour Members could explain about the conspiracy between the Tory and Liberal parties, tell the Newbury electorate that they are both in one bag and give the people there a chance to vote for members of the Labour party who will vote against Maastricht.

The Second Deputy Chairman: I think that that goes well beyond my duties in the Chair.

Mr. Bill Walker: On a point of order, Dame Janet. You quite properly said that the Chair's responsibility was, among other things, to protect the minorities. As I happen to be the only Scottish Conservative Member who stood at the general election on a platform of opposing the

Maastricht treaty, would I be correct in assuming, Dame Janet, that I belong to that rare breed of minorities that are to be taken into consideration? If so, may I remind you that I was trying to speak in the debate?

The Second Deputy Chairman: It may not always be possible to call all hon. Members who wish to speak, but I think that the hon. Gentleman would agree that he has had a reasonable share. We must now turn to the next—

Mr. Winnick: Will you, Dame Janet, accept a motion to report progress?

The Second Deputy Chairman: No, I will not. We now come to the next group of amendments, under the heading "Economic policy and deficits".

Mr. Peter Shore: I beg to move amendment No. 79, in page 1, line 9, after 'II', insert
'(with the exception of those Articles and Protocols set out in Schedule [Excessive Deficits])'.

The Second Deputy Chairman: With this, it will be convenient also to discuss the following: Amendment No. 98, in clause 1, page 1, line 9 after 'II', insert
'(except Article 104c on page 19 of Cm 1934 which concerns excessive Government deficits)'.
Amendment No. 100, in page 1, line 9, after 'II', insert
'(except Articles 103(3) on page 18 and 109j on page 28 of Cm 1934 which concern convergence conditions for monetary union)'.
Amendment No. 119, page 1, line 9, after 'II', insert
'(except the protocol on the excessive deficit procedure on page 111 of Cmd 1934 in relation to Article 104c of Title II).'.
Amendment No. 201, in page 1, line 9, after 'II', insert
'except Article 102a of Title VI on page 17 of Cm 1934'.
Amendment No. 202, in page 1, line 9, after 'II', insert
'except Article 103a(1) on page 18 of Cm 1934'.
Amendment No. 324, in page 1, line 9, after
'II', insert (except paragraph 2 of Article 103 on page 18 of Cm 1934)'.
Amendment No. 362, in page 1, line 9, afer 'II', insert
'except Article 3(a) Section 1 as referred to in Article G on page 10 of Command Paper number 1934'.
Amendment No. 47, in page 1, line 10, after '1992', insert
'but not Article 103 in Title II thereof'.
Amendment No. 48, in page 1, line 10, after '1992', insert
'but not Article 104c in Title II thereof'.
Amendment No. 61, in page 1, line 10, after '1992', insert
'but not the Protocol on the Excessive Deficit Procedure.'.
Amendment No. 203, in page 1, line 10, after '1992', insert
'but not Article 103a in Title VI of Title II thereof'.
Amendment No. 114, in page 1, line 17, at end add—
'The above subsections shall only come into force subsequent to the laying before Parliament of a Command Paper concerning the implications for the United Kingdom of Articles 102a and 103 and related Articles of the Treaty on European Union, with particular reference to the decision-making structure in respect of economic convergence and allocation of resources and to approval of its terms by Resolution of both Houses of Parliament.'.
New clause 2—Information from Commission—
'In implementing the provisions of Article 103(3) of Title II of the Treaty on European Union, information shall be submitted to the Commission from the United Kingdom indicating performance on economic growth, industrial


investment, employment and balance of trade, together with comparisons with those items of performance from other member states.'.
New clause 57—Convergence criteria: assessment of deficits—
Before submitting the information required in implementing Article 103(3) of Title II of the Treaty on European Union, Her Majesty's Government shall report to Parliament for its approval an assessment of the medium term economic and budgetary position in relation to the social, economic and environmental goals set out in Title II, Article 2, which report shall form the basis of any submission of information to the Commission which may be required under Articles 103(3) and 104(c) of the Treaty.'.
Amendment No. 80, new schedule:—

EXCESSIVE DEFICITS

(1) Article 104c.
(2) Protocol on Excessive Deficits.'.

Mr. Shore: The amendment seeks to exclude article 104c and its related protocol. I am sure that the Committee will be delighted to know that this is not a probing amendment. It is a serious and substantive amendment, and we shall vote on it when the time comes. That means that we have come to the end of a period of what I call cosy collusion and shadow boxing among the Opposition Front Bench spokesmen, the Ministers and the Liberal Democrats, all of whom are in favour of the treaty and have been conducting a spurious debate on the issue. At least we shall try, now that we have the opportunity, to put the serious arguments before the Committee, because I believe that the Committee should consider them.
As the Committee will be aware, the public sector borrowing requirement has always been one of the crucial instruments of economic policy. I have always thought of the size of the Government's borrowing requirement as the Chancellor of the Exchequer's Budget judgment, to be made each year in the light of the circumstances that pertain. Under the treaty, and especially under article 104c, that judgment is no longer to be taken by any future Chancellor of the Exchequer of the United Kingdom. Instead, the Budget judgment is to be made by the Maastricht treaty.
Article 104c begins with the imperative instruction:
Member States shall avoid excessive government deficits.
The associated protocol than lays down what it calls the "reference values", according to which an excessive Government deficit is to be judged. I am sure that the Committee will be familiar by now with the two reference values—3 per cent. of GDP for the public sector borrowing requirement, and 60 per cent. of GDP as the reference value, or limit, for the national debt.
It is true that words are added to article 104c that give a certain qualification to the starkness of the 3 per cent. and 60 per cent. specified in the protocol. Extremely carefully chosen words allow some slight movement from those precise values. Article 104c(2) says:
The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria"—
this is where the slight softening of the harsh terms of 3 per cent. and 60 per cent. comes in—
whether the ratio of the planned or actual government deficit to gross domestic product exceeds a reference value, unless…the ratio has declined substantially and reached a level that comes close to the reference value"—

I emphasise the word "close"; in the case of the PSBR, that means close to 3 per cent.—
or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value.
That is most important, as I shall show later, in relation to this country's experience. It is easy to imagine the effects of those limitations.

Mr. Winnick: We have been hearing from hon. Members, including some Labour Members, that the treaty favours opportunities for employment and so on. It is true that article 2 contains a passing reference to employment, but article 104c contains two full columns giving all the reasons why Governments should avoid deficits. I am sure that my right hon. Friend will be mentioning the fact that the article goes on to refer to the penalties and fines that could be imposed if Governments exceeded the 3 per cent. Does my right hon. Friend agree that there is all the difference between a passing reference to employment and social policy, of which we would all approve, and the emphasis in article 104c on the deficit and on what could happen to member states that exceed the limit?

Mr. Shore: I can assure my hon. Friend that I shall be saying something about the penalties and coercive powers that are allowed under the provisions, which I find profoundly disturbing.
Article 104c(3) contains a slight concession in respect of the strictness of the 3 per cent. and 6 per cent. limits. As I have said, the Commission is the great disciplining force. It will monitor and identify gross errors. Article 104c(3) states:
If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report.
Here comes the slight concession:
The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium term economic and budgetary position of the Member State.

Dr. Godman: My right hon. Friend talks about the Commission being the disciplining force. Is he entirely correct? It appears that, under article 104c, the Commission will perform the role of policeman but that astonishingly,—to my mind—the Council will perform the role of a court. Paragraph 11 says that the Council can
impose fines of an appropriate size.
Will the Council in turn refer a recalcitrant member to the European Court of Justice, or does the Council have the power to impose fines on member states?

Mr. Shore: I shall discuss that a little later in my speech. My hon. Friend is correct in what he said at the beginning. The Commission basically has a policing role, and it is the Council of Ministers that makes the decision.

Mr. Nicholas Winterton: Can the right hon. Gentleman imagine this scenario? Suppose that the United Kingdom has ratified Maastricht and is part of the structure, and our membership, at some time in the future, of the ERM, has produced a situation similar to that which has prevailed for the past 18 months—that is, it has lost this country thousands of businesses and a million jobs. A million jobs cost this country £8 billion, which contributes to our deficit. Because of our membership of a Community institution and a Community system, we would be in


deficit beyond the 3 per cent., and because of that, we would be further fined. That could happen. Is that a situation that the right hon. Gentleman relishes or believes that the people of this country would relish?

Mr. Shore: It is outrageous, and I shall develop my reasons for saying so. The whole notion of an alien body imposing fines and penalties on a sovereign nation is entirely unacceptable.
I was referring to the policeman role of the Commission, which will monitor, identify gross errors and draw up a report. The provision says that it will take account of whether a Government's deficit exceeds Government investment expenditure, as though that were somehow less a matter for condemnation than if it was simply a current account deficit.
We have not been told what weight the Commission will give to such matters, but we should not be over-cheered when we consider Government investment expenditure in this country as a percentage of GDP, because it accounts for a small part of the total. Indeed, in the Red Book published this year, we got a picture of general Government investment. It showed that between £11 billion and £12.5 billion—about 2 per cent. of GDP—is the total of Government investment. I ask the Committee to bear those details in mind as I describe the relevance of the figures.

Sir Teddy Taylor: Will the right hon. Gentleman, in view of his knowledge, explain to what the gross errors relate? Are they errors of judgment or arithmetical errors? Having read the provision many times, I still do not have a clue what it means by gross errors. Does he believe, as I do, that somebody will consider whether an error of judgment has been made? If so, that will be a major step beyond an arithmetical error.

Mr. Shore: I think it refers back to the figures of 3 per cent. and 60 per cent., allowing a margin or tolerance, as I described it. It refers to gross errors, and those errors will be the distance of a country's performance from its targets. The Commission will prepare a report if it believes there is a risk of an excessive deficit. It is empowered, having consulted the monetary committee, to address an opinion to the Council. The Council, acting by a qualified majority, will decide whether an excessive deficit has arisen.
We can conclude that there is an imprecise margin, a tolerance, in the reference values of 3 per cent. and 60 per cent. How helpful is that margin likely to be? To answer that, I must refer the Committee to certain statistics. The first is this year's PSBR. The projected PSBR figures for 1992–93 to 1997–98 are set out in the medium-term financial strategy in Red Book. For 1992–93, the PSBR was 5·75 per cent. For 1993–94, the year on which the Budget has concentrated, it is 8 per cent. of GDP. In 1994–95, it is 6·5 per cent., 1995–96, 5·5 per cent. and 1996–97, 4·5 per cent.
The figure comes close to the presumption in the present forecast only in 1997–98 when it is under 4 per cent. —3·75 per cent.—for the first time. If we had to get within the 3 per cent. level over that whole period, what would be the effects on the British economy, the level of employment and funding of public services?

Sir Teddy Taylor: They would shove up taxes.

Mr. Shore: It is unbelievable to think what would happen. Six billion pounds is equivalent to 1 per cent. of GDP. When we have a public sector borrowing requirement deficit which has been forecast at 8 per cent. of gross domestic product, we are talking about £30 billion in either reduced expenditure or increased taxation to get from 8 to 3 per cent. A lesser amount—although it would still be a high figure—would be demanded in each year of the five-year forecast of the public sector borrowing requirement.

Mr. Wilkinson: Does the right hon. Gentleman find it extraordinary that, far from the Council communicating to the national parliament of a country which is straying outside the guideline reference of percentage gross national product on budget deficit, paragraph 11 merely suggests that the President of the Council shall inform the European Parliament of a decision taken? In our earlier debate, the Financial Secretary said that the member state will continue to have independent fiscal powers. That does not seem to accord with paragraph 11, which says that the European Parliament is the body which must be told about a defaulting country.

Mr. Shore: That is absolutely right. It is a different form of coercion from that which we were talking about with regard to the central bank and its powers. Collective decisions will be made by qualified majority voting in the Council. The Commission will make its recommendation and report, and the Council will act on it by qualified majority voting. That will be a major imposition on the United Kingdom. We might have a report or we might demand a debate on it, but we will have no power to influence it.

Mr. Winnick: As far as Britain and the House of Commons are concerned, do we not lose both ways under article 104c? A right-wing Tory Government who were determined to cut public spending—they need no such encouragement—would undoubtedly say, "We have no alternative under the terms of the treaty." Likewise, a Labour Government—hopefully carrying out policies which we would like to see—would say, "We would like to do otherwise. It goes against the grain; nevertheless, we are part and parcel of the arrangements. We have no alternative because, if we go over the limit as far as the deficit is concerned, and if we do the public spending and so on which the Labour movement is so keen about, we will be penalised." At the end of the day, power is completely taken away from this Chamber.

Mr. Shore: I am coming to a point which will help my hon. Friend's case. It is true that the Labour party has always had a special commitment to public expenditure and public services. We plead guilty. Therefore, to have such limitations imposed on a Labour Government is totally unacceptable.
I do not wish to split the Committee unnecessarily. Many people on the other side of politics also understand the value of public services and public expenditure and do not want to see the devastation and ever-increasing unemployment that would result from the restriction on borrowing. So the matter should not necessarily divide us, although I say again that there is a special affection for public expenditure in the Labour party.

Mr. Betts: I am sure that no Opposition Member would find the rigid imposition of the 3 per cent. or 60 per cent. reference criteria acceptable, but is it not the case that, in their raw and unrefined form, the criteria in article 104c(2) apply to the production of a report? Once that report is produced, as laid down in paragraph 3, other criteria, including the investment expenditure criteria, all other relevant factors, the medium-term economic and budgetary strategy and the comments of the member states, later come into play. My right hon. Friend referred to Government forecasts of debt as a percentage of GDP for the next few years. They include a large element of the non-cyclical part of investment expenditure, which would be taken into account under paragraph 3.

Mr. Shore: My hon. Friend is trying to comfort himself. I understand well why he does so—because the article is so unacceptable. He is trying to say that it does not mean what it says, and that 3 per cent. is not the real figure. I carefully went over the ground saying where the tolerances were. The figures were approximations which would only exceptionally be departed from. I also took special account of the distinction made between investment expenditure and other expenditure. As the total investment expenditure is only 2 per cent., if it is all taken into account and set against the target, anything over 3 per cent. plus 2 per cent. would be ruled out.
Next year, the Government PSBR is 8 per cent. of GDP. In no way can my hon. Friend comfort himself by saying that the matter has been dealt with and that reports have to be produced and a judgment made. Of course that is so. Of course people have to consider it. But at the end of the day, the treaty defines excess deficit. I am not even certain whether action could not be taken before the European Court of Justice in the fulfilment of those treaty terms.

Mr. Skinner: My right hon Friend will appreciate that my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) would have been in one hell of a mess as the leader of Sheffield city council if the same restrictions had been placed on borrowing. Within our parliamentary set-up, he was able to extricate the city council from its problems to a degree. If Sheffield was transposed to the nation state arena inside the Common Market, he would have had supreme difficulties.
My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) remembers 1976. He remembers Mr. Witteveen. I remember the fight that my right hon. Friend put up for an alternative policy to the restrictions. Does he agree that, even though the Labour Government took the wrong turn on that occasion—history has shown it to be wrong, and my right hon. Friend was right in the battle that he took part in—we were able to resolve that problem in a limited fashion within the nation state? Yet inside the Common Market, Mr. Witteveen would have reigned supreme not merely for a few months or years: we would have been in his stranglehold for ever.

Mr. Shore: Absolutely right. That is the central difference. All Governments who are obliged to call in the International Monetary Fund have to come to some agreement with it. But a sporadic visit is a different thing from the permanent requirements of the treaty. It would be as though a European Commissioner sat at the Cabinet

table all the time invigilating and watching whether the Government were about to transgress or had transgressed their reference values.

Mr. Cash: The so-called opt-in which has been negotiated on behalf of the United Kingdom, relating to the central bank and the deficit arrangement, excludes during the transitional period article 104c(1) and other provisions, including the requirement not to have excessive Government deficits. Does the right hon. Gentleman agree that, although the opt-in or opt-out that has been so acclaimed is no more than a fig leaf, as Robin Oakley of the BBC made clear he had understood from everyone he came across in Whitehall and the European Community, there is another protocol, which says that all these arrangements are irreversible and irrevocable and must come into effect on 1 January 1999, come what may, and which tells the truth about what is going on. Just in case the Minister—

The Second Deputy Chairman: Order. This is an intervention, not a speech.

Mr. Cash: In case the Minister is tempted to say that all the provisions are left out under the protocol, I simply want to point out that the protocol is a worthless piece of paper, and that a future Parliament will not be in a position to make a decision. The decision is being taken now. The Minister may be shaking his head, but that is the position.

Mr. Shore: I shall certainly await with interest what the Minister has to say.
One of the difficulties of tonight's debate is that there are three closely related economic debates on which more amendments have been tabled than for the rest of the treaty. Unfortunately, those three immensely important interrelated debates will be pushed through in a single unbroken session. We have not had the opportunity of studying in Hansard what the Minister has said in response to the first debate before being launched into the second, and it looks as though the Government will try to press us into the third debate.
The point raised by the hon. Member for Stafford (Mr. Cash) cannot sensibly be answered until we have studied the Minister's replies to the first two debates. We shall not have that opportunity. It is a terrible misuse of the House of Commons on matters that everyone will agree, whether or not they are in favour of the treaty, are at the heart of it—economic and monetary union and the transfer of powers from Britain to European institutions.

Dr. Godman: May I ask my right hon. Friend a question about the monetary committee? In passing, I offer my compliments to my right hon. Friend and the 20 or 30 other hon. Members who, in the absence of a referendum, are performing a fine service for the people of the United Kingdom in scrutinising the treaty so closely. As the Council seems to have the power to impose fines against a recalcitrant state, has that state the right of appeal to the European Court of Justice? Given that there are 26 persons to be appointed to the monetary committee, does that committee's opinion have to be unanimous when it recommends that a state be fined by the Council?

Mr. Winnick: On a point of order, Dame Janet, before my right hon. Friend replies to that intervention—I apologise to him. I sought earlier to move to report


progress and, no doubt on reflection, you decided not to accept my motion. Was your refusal such that you would not consider it at any future stage during the night, or would you be willing to accept a motion, or at least ponder it at some appropriate time?
Some of us believe, arising from what my right hon. Friend said, that it is totally wrong, quite inappropriate, that we should be debating these matters all through the night, and that we should have a further opportunity at some other time to do so.

Mr. Nicholas Winterton: Further to the specific point of order, Dame Janet, raised by the hon. Member for Walsall, North (Mr. Winnick). I believe that I am correct in saying that the Select Committee on Procedure has produced a report, which has not been fully debated or agreed by the House, based upon the Jopling inquiry carried out on behalf of the House, which firmly recommends—senior and distinguished Members were part of the Committee and agreed to the report—that the House should not sit beyond 10 o'clock on Government business.
I put the point particularly to you, Dame Janet, because of the observations just made by the right hon. Member for Bethnal Green and Stepney (Mr. Shore). In these particular groups of amendments that we have considered, are considering and, depending on your ruling, may well be considering a little later, on critical constitutional matters, it is important for those of us who are trying to scrutinise this legislation to have an opportunity to study the ministerial responses.
As a constitutionalist and a man deeply wedded to the rights of the House, I put it to you that we are being deprived of that opportunity. Bearing in mind the report that the Select Committee on Procedure has produced, this is surely an abuse of the Committee by the Government of the day.

The Second Deputy Chairman: The Chair must operate under existing rules, customs and Standing Orders. As the hon. Member will know very well, it is perfectly possible to extend the sittings of the Committee under the present regime. As regards any motion to report progress, whoever is the occupant of the Chair at the time will have to come to that decision. I would certainly not wish to give any opinion in advance.

Mr. Spearing: On a point of order, Dame Janet. Can you confirm that the rules of order, both for the Committee upstairs and the Committee downstairs, permit the Chair to accept a motion for closure, even when there has been no wind-up or reply from the Government Benches after the introductory speech which they have made, as no doubt they will shortly, in relation to any group of amendments?
The customs and courtesies that I have experienced upstairs have been that there has been a reply from the Government Bench after other speeches have been made and as a sort of wind-up comparable to that at Second Reading. I take it—perhaps you will confirm it—that no Standing Order prohibits your accepting a motion for the closure even when that has not happened?
Can I put it to you, Dame Janet, that it may well be within your discretion—perhaps you could confirm that it

is possible—for you to decline to accept that motion for closure if such a reply has not been given in these debates of enormous constitutional significance?

The Deputy Chairman: The Chair has discretion, but one looks to the principles behind it, which are clearly stated—that there should be no gross abuse of the rights of minorities in the House. I think that we must make further progress.

Mr. Shore: A ruling on what is a gross abuse or what is a gross excess is among the things that we are discussing tonight.
My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) intervened just before points of order were raised, and I will try to deal with the question he put. My understanding is that the Council of Ministers, by qualified majority vote and excluding the member state which is, as it were, in the dock, will make the decision.
I do not think that there is an appeal to the European Court of Justice against that, but if a member state refused to comply with the further penalties, the Commission could take that state to the court.

Dr. Godman: On a point of order, Dame Janet. My questions to my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), concerning the power of the Council to impose swingeing fines, and the powers of the monetary committee, raise important legal questions, and, as you know, I am not a lawyer. It would be helpful if the Attorney-General were present during the debate to give us guidance on those important questions. From article 104c, it would appear that the Council will take on some of the functions of an international court. I am not so sure that any hon. Member present can answer the questions that—perhaps unfairly—I asked my right hon. Friend. They are important legal questions, and an English and a Scottish Law Officer should be present.

The Second Deputy Chairman: I think that the hon. Member has been here long enough to know that it is not for the Chair to compel the attendance of the Attorney-General or any other hon. Member. Representatives of the Government are on the Front Bench, and no doubt they will have heard the hon. Gentleman's point of order.

Mr. Shore: Obviously it would be helpful if the Attorney-General were here to deal with the sort of questions that my hon. Friend the Member for Greenock and Port Glasgow has raised. I also find it surprising that the Chancellor and shadow Chancellor of the Exchequer have not looked in. I cannot think of any measure which more directly affects the power of a Chancellor than the impositions that will be placed upon him in the exercise of his Budget judgment, under the terms of the treaty.

Mr. Wilkinson: Might not that power be redundant in the future, in as much as it will be transferred to the Commission and the Council of Ministers?

Mr. Shore: Perhaps so, but I cannot believe that that could be welcome to the Chancellor, or his shadow, if they take their responsibilities seriously, as I believe they do. The present Chancellor is already a transgressor of the treaty, as he has gone way beyond the limits of tolerance, which I was trying delicately to outline. He has behaved like Sheffield council at its worst.
I was seeking to establish that the matter concerns both sides of the House. I have given the figures for the Government's medium-term forecast for the economy. Every year, it has been well in excess of that forecast, except for last year, when it just crept under 4 per cent. It cannot be right that we should subject ourselves to that sort of discipline. It cannot be the Government's judgment that that is right for the country—they have their own economic doctrines and priorities—and it certainly is not the judgment of those on the Labour Front Bench and in the Labour party that it is good for Britain to be forced to make the sort of cuts, or raise the taxes, indicated by the figures.

Mr. Cryer: That issue is of peculiar importance to Labour Members. My right hon. Friend has outlined a scenario in which a Labour Government could be elected, inheriting a deficit created by a Conservative Chancellor of the Exchequer and a Conservative Government. As my right hon. Friend said, we would be elected to have particular regard to the virtues of the services provided by the public sector but, if the Maastricht treaty were in operation, we would have to embark on a programme of cuts, perhaps amounting to £30 billion in present circumstances. Therefore, it is of special interest and concern to Labour members that we do not go down that road, as it would wreck the chances of a Labour Government and the potential of the Labour party.

Mr. Shore: I thank my hon. Friend. It is extraordinary that the most senior representatives of our own party are not taking part in this debate. If they disagree with the treaty, they should say so. If they agree to accept the disciplines on their future conduct, they should explain their position.

Mr. Andrew Smith: Does not my right hon. Friend acknowledge that our right hon. and learned Friend the Leader of the Opposition made it quite clear that the attempt to impose a 3 per cent. deficit limit in present circumstances would be both misguided and absurd?

Mr. Shore: Very good, but we are not talking just about this year. The forecast is that the deficit will be well in excess of the 3 per cent. limit for the next four or five years. And that is quite apart from additional programmes that my right hon. Friends may wish to introduce if we are successful in the next general election. Indeed, the absence of my right hon. and hon. Friends is extraordinary for another reason, and for the same reason this is a matter of common concern between the Government and Opposition parties.
I can best illustrate my point by referring the Committee to the PSBR record between 1972–73 and 1981–82. During those years, the requirement was never under 3 per cent. Under the Heath Government, the figures were as follows: 3·7 per cent. in 1972–73, and 5·9 per cent. in 1973–74. Under the following Labour Government, they were: 9·1 per cent. in 1974–75, 9·4 per cent. in 1975–76, 6·5 per cent. in 1976–77, 3·6 per cent. in 1977–78, and 5·4 per cent. in 1978–79. The next Conservative Government had similar problems, the figures being 4·8 per cent. in 1979–80, 5·4 per cent. in 1980–81, and 3·4 per cent. in 1981–82.
A particular Government may face very difficult problems, but these figures suggest that both parties and three successive Governments found it necessary to have a PSBR substantially in excess of the reference limit that this treaty seeks to impose.

Mr. Skinner: It is worth noting that the years to which my right hon. Friend has just referred were the great privatisation and North sea oil tax years. Now we are talking about going up to 8 per cent. I read in the Financial Times the other day a story to the effect that the Chancellor's Budget figures had been doctored. We are not talking about £35 billion for this financial year; the figure is about £10 billion worse than that. Had it not been for North sea oil and privatisation, the PSBR figures for the years between 1982 and 1989 could have been up to 8, 9 or 10 per cent. Indeed, that will probably happen before this lot are finished.

Mr. Shore: My hon. Friend is correct. The fact that the PSBR is very significantly less than it would otherwise have been is accounted for by the sale of publicly owned assets, bringing in £6 billion, £7 billion or more a year. My hon. Friend is absolutely right about North sea oil also. The North sea produced a great flood of revenue, particularly during the 1980s. But for that, too, there would have been a much larger PSBR.

Ms Diane Abbott: My hon. Friend the Member for Oxford, East (Mr. Smith) said, with just a touch of irritation, that any attempt to impose a 3 per cent. limit would be misguided and absurd. We can all agree about that.
If Labour Members vote for this part of the treaty, that is what we shall be signing up to. Back Benchers can only marvel at the way in which the Front-Bench team seeks to evade the issue of what the text of the treaty states.

Mr. Shore: I can only agree 100 per cent. with my hon. Friend. If anyone objects to having the yoke of 3 per cent. put upon them, they should stand up and say so and vote against it. That is the message that should go out.

2 am

Mr. Austin Mitchell: Thanks to the unforgivable silliness of the Liberals in allowing the Government to force crucial economic measures through the night, I am not at the peak of my mental activity, which is fairly low anyway. The Liberals have forced us into the position of hurrying the measures through in the dead of the night when hon. Members are half asleep so that the Liberals can hide their shame at what is being done. Therefore, it is difficult to follow the argument.
The figures that my hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) gives are those for the PSBR, but the 3 per cent. limit referred to the public sector financial deficit, which will constitute the PSBR plus the borrowing receipts from privatisation. Therefore, the deficit will be bigger than the borrowing requirement.

Mr. Shore: That was the point being made by my hon. Friend the Member for Bolsover (Mr. Skinner).
What deeply disturbs me is that some of my hon. Friends whose professional activity is to put a favourable gloss on the treaty try hard to say that it is not quite what it seems. The most astonishing omission from the treaty is the fact that it never faces the issue of counter-recession policy, about which it contains not a word. We all know


from experience that there is a built-in cyclical movement over five or more years in a market economy—there are absolutely predictable waves of activity. There is a tendency for a boom, which then falls away into a recession. That is a common experience, not only of Governments of both parties over the years, but of the western world.
One lesson that we should have learnt from the disasters of the inter-war years was that tendency to go too high in a boom, and too low into recession and slump. Why is that aspect not written into the protocol? Why does it not say that we must recognise those counter-cyclical problems, and will certainly do so if unemployment grows by X per cent.? Instead of having merely 3 per cent. and 60 per cent. for borrowing and debt, why not have 3, 4 or 5 per cent. of the level of unemployment or the fall in gross domestic product? If such indicators were part of the protocol, we would have some reason to take seriously the arguments of those who try to gloss over the reality of the outrage that is being inflicted on us.

Mr. Betts: I agree with my right hon. Friend on the need for a counter-cyclical policy, but what does he think that the words
other relevant factors, including the medium term economic and budgetary position of the Member State
mean in paragraph 3 of article 104c? I take them to mean exactly what my hon. Friend is advocating—the need for a counter-cyclical policy.

Mr. Shore: If that is what the treaty means, it should have been spelt out, but I do not for a moment believe that it does. The paragraph refers to the sort of run of figures provided by the Government in the Red Book so that a judgment can be made on whether the nation state is tending towards, deviating from or approximating to the 3 per cent. and 60 per cent. reference points contained in the protocol.

Mr. Skinner: Woolly statements have just been mentioned by my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) and others, and my hon. Friend the Member for Oxford, East (Mr. Smith) described them as safeguards. In a nutshell, those statements mean only what the Chancellor and the Prime Minister said a few weeks or months ago about extending VAT. They are as strong as their statements when they said that they had no present plans to do so. Statements from the Common Market and from the protocol will be treated in the same fashion. They are not specific, but they will be rammed down our throats. I cannot understand why our Front-Bench spokesmen connive with the Government Front Bench when for the rest of this week they played merry hell about the Government not using precise words. But they are prepared to accept this woolly, abstract statement, because it is about their beloved Common Market. The whole thing stinks.

Mr. Shore: Some statements are later denied or withdrawn—that is a common experience—but we are not discussing statements: we are talking about a treaty, for God's sake, which is legally enforceable. That is the reason for concern. As I have said, the omission of any direct reference to deficit financing is extraordinary.

Mr. Spearing: May I relate my right hon. Friend's excellent questions and arguments to his earlier comment about the absence of the Chancellor and his opposite

number? One explanation is that, if they were present, they would have to silently acquiesce to my right hon. Friend's argument or attempt to reply. Their absence during a debate deliberately brought about in the middle of the night by the Government on the major issue of our national finance shows that they do not wish to engage in the debate. That is because they cannot face my right hon. Friend's questions on behalf of our nation.

Mr. Shore: That adds to my general criticism about the sadness of this ruse to obtain a debate in the middle of the night. We are talking to ourselves, and there are only 30 or 40 of us here. We are debating an issue that could damage our people more than anything else if they knew about it. That damage will occur if they are clamped into this straitjacket. We have been tricked into a debate, thanks to Liberal connivance, late at night without being able to distinguish between one major issue and another. The Financial Secretary does not do himself any credit by grinning foolishly. It is a disgrace, and he knows it.

Mr. Leighton: Nobody is fond of deficits, but surely they should be for the judgment of the Chancellor of the day and not enshrined in an international treaty. Does ray right hon. Friend agree that deficits in virtually all the Community countries are well above 3 per cent. at the moment? Can he envisage what it will mean for those countries to try to come down to 3 per cent. in a time of recession? Does he know that the Prime Minister of Belgium resigned two days ago because of a budget to reduce Belgium's deficit from 6 point something per cent. to 3 per cent? The measure could not get through, and he had to resign.
Is my right hon. Friend also aware that my right hon. and learned Friend the Leader of the Opposition recently said:
If all member states of the EC tried to satisfy the 3 per cent. target by the end of 1996,…the combined effect on total EC output would be a reduction of over 2 per cent.
In other words, the attempt to get down to 3 per cent. by 1996 will cause another recession. Is that not crazy and a betrayal of everything that our party has ever stood for?

Mr. Shore: My hon. Friend does well to remind us of the international dimension. If European countries that are clearly not conforming to the guidelines set themselves on a deflationary course of converging upon those targets, it would cause terrible damage not only to those countries and their employment, but to the international trading and economic community. It could be done terrible damage, and we could conceivably find ourselves in a 1929–31 situation.

Mr. Wilkinson: Is not the Maastricht process a grotesque double whammy—the ERM and the monetary discipline required to remain within the parities necessitated by the mechanism? Countries such as Spain have unemployment of about 20 per cent. and at the same time a whopping budget deficit. Were the budget deficit criteria to be implemented, the effect would be absolutely catastrophic. It would be like the slump of the early 1930s.

Mr. Shore: That is true. Another illustration of that is the fate of the socialist Government in France, with 3 million unemployed by conforming to a Frankfurt policy, leading to high interest rates and strong deflationary pressures. After 10 years of socialist government, something more was expected than 3 million


unemployed. Incidentally, that figure existed throughout those 10 years, because France's folly was to join the ERM in 1979 and to give up those easy adjustments in the first few years, when the ERM became increasingly hard and rigid—with the results that we now know.
Another important point relates to the process of the identification of punishment under article 104c. Of course there are considerations, and judgments must be made, but we should have no doubt about the penalties.
Paragraph 9 of article 104c states:
If a Member State persists in failing to put into practice the recommendations of the Council, the Council may decide to give notice to the Member State to take, within a specified time limit, measures for the deficit reduction which is judged necessary by the Council in order to remedy the situation.
In such a case, the Council may request the Member State concerned to submit reports in accordance with a specific timetable".
In other words, "We'll give you a couple of years to change. We want to see a new Red Book, with very different figures from those that we see now."

Sir Trevor Skeet: The right hon. Gentleman makes a very good point, but paragraphs 9 and 11 are knocked out by the protocol. As to the avoidance of budget deficits, one should refer to article 109e(4):
In the second stage, Member States shall endeavour to avoid excessive government deficits.
The statement in article 104c(1) that
Member States shall avoid excessive government deficits
only applies to stage 3, where the other provisions are knocked out.

Mr. Shore: There is that difference. I understand that avoidance is not mandatory under stage 2, but a member state is supposed to make the effort and to give evidence of it. If it does not, the Commission will monitor the member state anyway, to ascertain how far short it has fallen.
The most coercive part is article 104c(11):
As long as a Member State fails to comply with a decision taken in accordance with paragraph 9"—
which I read—
the Council may decide to apply or, as the case may be, intensify one or more of the following measures:
—to require the Member State concerned to publish additional information, to be specified by the Council, before issuing bonds and securities;
—to invite the European Investment Bank to reconsider its lending policy towards the Member State concerned.
—to require the Member State concerned to make a non-interest-bearing deposit of an appropriate size with the Community until the excessive deficit has, in the view of the Council, been corrected.
—to impose fines of an appropriate size.

Dr. Godman: I am sorry to keep interrupting my right hon. Friend, but these are critical questions that need to be answered in a tough scrutiny of the implications of paragraph 11, and, in the absence of a Law Officer, I need his guidance.
Can my right hon. Friend confirm that, if a state is being judged by the Council and the imposition of a fine is possible, the Minister from that state will be excluded from the Council's deliberations? In other words, will the recalcitrant state be denied representation at a meeting which may or may not decide to fine it?

Mr. Shore: Presumably, the Minister from the delinquent state will be called in to explain why he has not conformed to the guidelines laid down by the Council. Having given his explanation, he will be asked to leave the room so that a vote can be taken in which he will not participate.

Dr. Godman: With respect to my right hon. Friend, we are talking about a meeting of the Council. How can the Council exclude the Minister from its deliberations without infringing other articles of the treaty?

Mr. Shore: That is an interesting question, and I cannot really answer it—

Mr. Dorrell: rose—

Mr. Shore: —but the Minister is going to help.

Mr. Dorrell: As the hon. Member for Greenock and Port Glasgow (Dr. Godman) rightly says, we are talking about a meeting of the Council. The member state whose record is under scrutiny will be represented in the normal way, and the Minister can contribute to the discussion; the only change is that the Minister will not be able to take part in the qualified majority vote.

Mr. Shore: The Council can, if it wishes, use an incredible series of powers to impose penalties on a recalcitrant member state that exceeds the so-called deficit.

Mr. Dorrell: I think that I misled the House in a minor way when I used the phrase "qualified majority". I should have referred to
two thirds of the votes of its members weighted in accordance with article 148(2), excluding the votes of the representative of the Member State concerned.

Mr. Shore: I am grateful for that information, but it does not change the position much.
Here, then, is a British Minister representing a state that has offended against some economic theory that has no basis in any serious economic analysis of what is a proper and appropriate public sector borrowing requirement, but is nevertheless written into the treaty. That state is treated—to use a phrase employed by one of my hon. Friends—like a rate-capped local authority. We are talking about a massive, indeed humiliating, transfer of power and self-government to European institutions. I do not understand how any Chancellor of the Exchequer, or any shadow Chancellor, could tolerate it for a moment. One of the reasons why we shall press the matter to a vote is that this is no probing amendment, but one that goes to the heart of British politics.

Several hon. Members: rose—

Mr. Shore: It is splendid to see such energy, but I want to say a little about economic policy relating to matters other than deficits.

Mr. Spearing: On that point, if the proposals are accepted, can my right hon. Friend think of any purpose in having general elections in future? Will it matter tuppence who is the Chancellor of the Exchequer, whether it is a Conservative, Labour or even a Liberal Chancellor, because decisions will be taken elsewhere?

Mr. Shore: That is a serious question, and, in conjunction with the issues that we discussed in our debate


on the previous group of amendments, it requires a serious answer. Are we to have any major controls left over the conduct of our own economic policy? I find it amazing that we should be trapped into a late-night debate on such a crucial matter, which affects the welfare, prosperity and future of our country, without even the possibility of studying Hansard between debates.

Mr. Cryer: In effect, my right hon. Friend is describing what would happen if a Labour Minister of a duly elected Government went to Brussels and returned to tell pensioners and patients of the national health service that there will have to be cuts, that there will be no investment in the national health service, and that there can be no assurance that there will be an adequate number of nurses or hospitals, because we lost the vote and the final decision was taken by other people. Can my right hon. Friend imagine a more wretched, humbling and appalling position for a Labour Chancellor to be in? Moreover, people will ask, "Weren't you part of the Labour party which agreed to the treaty as it went through Parliament?"

Mr. Shore: I do not think that we can use words too strong to condemn these provisions. We may argue among ourselves about whether we see a future wholly in Europe and so on. Some people are wildly keen federalists, and I can understand and even respect their position, but I do not understand how anyone can agree to these terms. Not only do I not understand; I have contempt for people who recommend that the British Parliament and people should have these restraints imposed on them. It is outrageous.
Other powers are also being taken away, not only control of public deficits and national debt ratios to GDP. Economic policy in general is to be taken over. After our previous debate, I am not sure how much economic policy will be left. Article 103 states:
Member States shall regard their economic policies as a matter of common concern",
which is perhaps not too awful a statement. But it continues:
The Council shall, acting by a qualified majority on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Community".
What is covered by that? The answer is economic policies. It presumably covers anything dealt with by the Department of Trade and Industry and what was once the Department of Energy.

Mr. Rowlands: Paragraph after paragraph of article 103 contains references to new powers being given to the Commission. The idea has been presented to us that, through subsidiarity, the Commission would be pushed out of the nooks and crannies of our lives. Is not the Commission prepared to give up those nooks and crannies because it is to gain new powers to go into every economic nook and cranny of our society? That is what article 103 is all about.

Mr. Shore: My hon. Friend is right. If I were a Brussels Commissioner, I should willingly give up powers over the nooks and crannies, the small change of regulating conditions in English zoos, for example, in exchange for the powers of control over the whole British economy.

Mr. Bill Walker: Does the right hon. Gentleman share my fear that, if we foolishly allowed this country to be committed to this aspect of this ghastly treaty, we should be encouraging the growth of a black economy, as has

happened in other parts of the world? Where the economic circumstances have produced chaos, which Governments have been unable to control, the black economy has thrived. The British people are enterprising, and that would certainly be the outcome of that sort of nonsense.

Mr. Shore: The results would be extremely serious—a total loss of faith in representative government and alienation from laws and policies imposed upon the British people by alien institutions in Europe. All that would be there. People would indeed feel massively betrayed.
I shall finish with my point about the Commission and the Council. Article 103(4) says:
Where it is established, under the procedure…that the economic policies of a Member State are not consistent with the broad guidelines referred to".
That means, "if a nation states wishes to pursue a certain kind of policy". Nation states might still do that; there are still some differences left between political parties, and one party in power might pursue a policy marginally different from that pursued by another. If a nation state's policies are
not consistent with the broad guidelines",
or if they
risk jeopardizing the proper functioning of economic and monetary union, the Council may, acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualified majority on a proposal from the Commission, decide to make its recommendations public.
There we are. The nation state will be put in the stocks and the international community will be invited to throw rotten fruit at us until we are allowed out.

Mr. Spearing: I wholeheartedly endorse my right hon. Friend's powerful argument. Is he aware that I have it on good authority that, even before the passage of the treaty, there has been a request from somewhere within the bosom of the Community for Governments to submit a programme for convergence? Various Governments have had to respond to that request.
I do not think that the request has been made public, and I do not know whether the Government intend to make their response public, but when the Financial Secretary replies tonight—or rather, when he makes what I hope will be his opening speech—perhaps he will tell us whether such a request has already been received, and if so, whether it has been made public in this country, whether the Government will respond to it, and how we are to hear about it. Surely what my right hon. Friend says may result from the treaty is already upon us: people are presupposing a request that may come afterwards.

Mr. Shore: I think that that matter will be explored again in the next debate, if we are so foolish as to rush on and try to take in stages 1, 2 and 3 of the approach to economic and monetary union, which will be the subject of the third economic debate. It would be wrong to go on to that debate without having had time to consider what has been said in the first two economic debates.

Mr. Wilkinson: Does the right hon. Gentleman agree that article 103(4), which he mentioned, contains at least an implicit risk that pressure may be put on the United Kingdom to waive its opt-out, and that our Parliament will be expected to agree before we move to stage 3 of the EMU? The article says that, if a nation's policies
risk jeopardizing the proper functioning of economic and monetary union, the Council may, acting by a qualified


majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned.
In other words, if we are still laggards towards the end of the 1990s, notwithstanding the views of this Parliament we may come under serious pressure from the Council to move to stage 3 of the EMU.

Mr. Shore: Indeed. There are several powers—for example, those allowing criticism to be made public—which, although they fall just short of the extreme penalties in stage 3, would be greatly damaging to any country, especially in relation to markets, currencies and matters of confidence. The availability of the weapon of publicity and criticism is bound to be an important factor in stages 1 and 2, before we reach the final stage.
We have discussed today the two crucial powers of the British Parliament over the British economy that remain now that we have lost the power to control our trade and have transferred many other decisions to the European Community. I refer to the two powers that are crucial to macro-economic management—control over one's interest and exchange rate, and the power to decide one's own public sector borrowing requirement and the whole stance of one's budget. If we surrender both those powers in the middle of the night, we shall have done badly by the British people.

Mr. Nicholas Winterton: I am delighted to follow the right hon. Member for Bethnal Green and Stepney (Mr. Shore), who has done the Committee and the House a great service by both his speeches today. The example that the right hon. Gentleman and some of his right hon. and hon. Friends, together with my hon. Friends, have set, represents the modest safeguard that we still possess in honouring our democratic procedures in the country and the House of Commons. As the Committee knows, immense pressure has been brought to bear upon those hon. Members, of whichever party, to minimise their opposition to the unnecessary, obsolete and irrelevant treaty on which we are spending so much time. It is an immense pleasure to follow the right hon. Gentleman, whose leadership on this matter I have always respected.
I read with interest an article by one Anatole Kaletsky in The Times of 18 March. I hope that the Committee will allow me to quote briefly from that article, which follows through the argument that the right hon. Member for Bethnal Green and Stepney has presented to us—especially in the latter part of his speech, which related to economic policy. The article states:
The astounding figure of £50 billion for the public sector borrowing requirement was the clearest possible reminder of how badly the economy has been managed in the past, and of what a crippling burden the whole country must bear"—
at this point, the article is slightly critical of the Treasury—
to keep a handful of complacent Treasury officials in their ivory tower at Great George Street. But even more alarming evidence of the Treasury's grip on the Major Government came in the budget "Red Book", showing tax revenues and economic projections for five years ahead.
The right hon. Member for Bethnal Green and Stepney referred more than once to the Red Book.
The article continues:
These figures reveal that Mr. Lamont's tax increases of £10·5 billion from 1995 onwards will be nowhere near

sufficient to plug the gap in public finances, if the Treasury's present expectations about the economy are fulfilled. In fact, if the economy grows from 1994 onwards at the Treasury's assumed average rate of 2·75 per cent. a year, Britain will still have a Government deficit"—
I believe that the right hon. Member for Bethnal Green and Stepney mentioned this—
of 4·75 per cent. of GDP in the last year of the present parliament.
I hope that my hon. Friends on the Front Bench will bear that in mind.
Even after Mr. Lamont's new exactions, Britain would in 1996 be guilty of a 'gross fiscal error' as defined at Maastricht. Thus, if Mr. Major ever succeeded in getting his treaty ratified, Britain would face great pressure to increase taxes at that time by another £11 billion annually to meet the Maastricht criteria and fulfil Mr. Major's longing to be at 'the heart of Europe'.

Mr. William Powell: I am grateful to my Friend for drawing to the attention of the Committee important material that has been overlooked by the Chancellor of the Exchequer. It is clear from my hon. Friend's remarks, if they are true, that the Government have embarked on an economic policy, underpinned in the Budget, that is massively out of line with what is required today. We need a policy for more vigorous growth, enabling the figures which my hon. Friend quoted to become irrelevant.

Mr. Winterton: I am not sure whether my close and hon. Friend, a Member whom I greatly admire, is trying to be helpful to me and my argument or to the occupants of the Treasury Bench. I endorse his view. If only the Chancellor realised what was going on at the grass roots his Budget would have been different because we need, above all, an expansion of the economy and the stimulation of economic growth.
I do not want to start a debate about the objectives of the Manufacturing and Construction Industries Alliance, which I launched here a few weeks ago. That alliance has the objectives that my hon. Friend the Member for Corby (Mr. Powell) outlined. But if my hon. Friend supports Maastricht—I believe he has in the past—he will not be able to achieve what he wants because, as the right hon. Member for Bethnal Green and Stepney forefully said, everything we are discussing will restrict growth and create higher unemployment, so creating a vicious circle.
As I pointed out in an intervention, a million jobs are costing the British Government £8 billion, so our present deficit could pale into insignificance, particularly when we consider a previous debate and the establishment of a European central bank, staffed and adminstered by unelected people to whom the Government of the day could not make representations.
The Minister, when replying briefly and inadequately to that debate, said that hon. Members could make their views known to the Government, and the officials of the central bank might, if the Official Report of the debate were brought to their attention, realise that there was concern. But what influence would an hon. Member here have with those officials in the European central bank whose salaries would make ours look like petty cash and who would disregard almost entirely the views of the properly elected Members of this Parliament?

Dr. Godman: I remind the hon. Gentleman of the role that the central bank will play in the scheme of things. At the start of the third stage, the monetary committee, which


will play a powerful role in the disciplining of states, will be replaced by an economic and financial committee to which the central bank will have a right of appointment. the central bank will be fully involved, having membership of the successor body to the monetary committee.

Mr. Winterton: The hon. Gentleman, who has intervened several times in the debate with great effect, has made another good point. I entirely endorse every word that he uttered.

Mr. Gill: Is my hon. Friend basing his exposition on a technical understanding of the economic matters involved or on his superb common sense?

Mr. Winterton: It is interesting that we are getting absolutely no reaction from the Government Front Bench. It may be that, because I have some knowledge of manufacturing industry and what is required, throughout the debate I have adopted a practical, responsible, sensible and earthy approach to the economic difficulties which the country faces.

Mr. Cryer: As the hon. Gentleman is pursuing that analogy in his illustration of this party's position on this group of amendments—and before we reach the Single European Act in this stage of integration—may I tell him that, when a Committee upstairs was dealing with an order which allowed garments to be marked with the source of manufacture, the then Minister in the Conservative Government, Mrs. Oppenheim, said clearly that we should not at any stage suggest that the order was designed to protect manufacturing industry because the Commission would be listening to our remarks in Committee in order to take action against the order if it was a trade barrier? The order was designed only to help consumers. That was before we reached the solemn stage of dealing with this treaty. If that was the argument of Ministers 10 years ago, what position have we now reached?

Mr. Winterton: I can only agree with what the hon. Gentleman says. He enables me to mention a parliamentary question to the President of the Board of Trade which I tabled only a few days ago. Another objective of the Manufacturing and Construction Industries Alliance, which I hope will assist in the regeneration of the manufacturing base of the United Kingdom, was to get the Government to identify areas of potential for import substitution.

Sir Teddy Taylor: It is illegal.

Mr. Winterton: Indeed. My hon. Friend has immediately latched on to the unfortunate, sad, disappointing and depressing reply which I received from the President of the Board of Trade. The Minister said that the Government could not do that because it would be considered an impediment to free trade. My hon. Friend the Member for Southend, East (Sir T. Taylor) says that it could be defined as a Euro-crime.
Is it wrong that the Government, in seeking to build up our economy as part of their economic policy—this group of amendments is about economic policy and deficits—and with the intention of reducing the trade deficit and, as a result, the Government deficit on their current account, would be prevented by the European Community from identifying areas of manufacturing capacity to regenerate the manufacturing base of the United Kingdom?
I cannot believe that that should in any event be described as a Euro-crime. It would be offensive to this country, as it seeks to build up its economy, to be restricted in doing so by the European Community. The position would be made worse if we ratified the Maastricht treaty.
The overwhelming reason for the length and depth of the United Kingdom recession has been the policy—sadly, of my Government—of shadowing the deutschmark and then joining the European exchange rate mechanism. Many Conservative Members, as well as Opposition right hon. and hon. Members, urged that we should not join the ERM. The Government ignored us, and even entered at a rate that was always outrageously irresponsible and could never have been maintained. We know what happened.

Mr. Skinner: Will the hon. Gentleman give way?

Mr. Winterton: I am happy to give way to the hon. Member for Bolsover (Mr. Skinner), who is an immense parliamentarian, whatever people may think of his views.

Mr. Skinner: The hon. Gentleman is trying to increase my majority in Bolsover.
The hon. Gentleman said that people like himself were against entering the ERM. It was the same on this side of the House. I remember the manifesto meeting of the Labour party before the last general election. It ought to be placed on record that my right hon. Friend the Member for Chesterfield (Mr. Benn) and I moved an amendment to the Labour manifesto that we should not take part in the ERM and a Labour Government should withdraw from it. We lost that vote by 37 votes to two at a joint meeting of the shadow Cabinet and the NEC. All the marshmallows and pseudo-lefts and all the other rag, tag and bobtails went along with it. What happened? Within a few months the whole thing had collapsed. People on our Front Bench still talked about possibly returning to the ERM. It is like a dog returning to its vomit.

Mr. Winterton: I accept much of what the hon. Member for Bolsover has just said, if not the tone of it. I have a sizeable majority in Macclesfield, as he does in Bolsover. I can only say to those on the Treasury Bench that perhaps some who are considered minorities are right. It is only a pity that the Government do not listen to those with some experience and those who have been consistent in the views that they have expressed.
My hon. Friend the Financial Secretary will know that the United Kingdom was first into recession and has, overall, been much harder hit than any other OECD country. No other OECD economy has contracted over two years as Britain has done. Other economies have done so much more slowly. They are slowing down, but they are still growing. That includes one of the important markets for the United Kingdom. I refer, of course, to the United States of America. Far be it from Britain to be dominated by Europe and look to Europe for its future. I believe that Britain should look to north America and the Pacific rim, where the real wealth is being created and economic growth is a major feature.

Mr. Gill: Is it not wrong that we should do almost 60 per cent. of our trade with only 6 per cent. of the world's population and only 40 per cent. of our trade with 94 per cent. of the world's population? Would any business man


regard that as a balanced debtors list? Would he not seek to expand his business and open more accounts with more people?

Mr. Winterton: As I come from a small business background, my answer to my hon. Friend, who also has a career as a successful business man, is in the affirmative. He would expect it to be in the affirmative.
Unfortunately, the Government are severely influenced by the Treasury, and far too few people in the Treasury have any real experience of industry and making money. They merely spend other people's money.
I quote from a leader published on 4 March 1993 in The Daily Telegraph, a paper not unknown to be favourable to the Government:
The Government has had no coherent economic policy since Black Wednesday. It is this vacuum at the heart of Government which produces the caution and scepticism which so annoy Mr. Major.
I quote that not to be helpful to my party or Treasury Ministers, but to be hopeful for the debate in the House of Commons.
I am sick and tired of the Government being totally committed to Europe and oblivious to what is going on elsewhere in the world. If they realised that there was a bigger and better world outside Europe, we should start to get some economic leadership and the British economy would begin to recover.

Mr. Wilkinson: I am sorry to interrupt my hon. Friend in full flow, but he refers to a void at the heart of British economic policy. Is not that void the great question mark over whether we will re-enter the ERM? Until the Government publicly eschew that option and say that we will not re-enter, uncertainty and lack of confidence will persist. We have been burnt once and thousands of people have been put out of work quite unnecessarily. Were that to happen again, it would be quite unforgivable.

Mr. Winterton: I entirely endorse the views of my hon. Friend, who anticipated the remarks I was about to make.

Sir Teddy Taylor: Does my hon. Friend agree that such uncertainty does not exist? Has he seen the "European Special" issued by Conservative MEPs to every constituency office, in which it is made abundantly clear that the Government intend to allow sterling to return to the ERM? So there is no doubt about it. Not only does the treaty indicate that we have to, but the MEPs' paper which is about to be published—and they are to move into central office at Smith square—makes it abundantly clear.
The Conservative manifesto said that we were going to move into the narrow band of the ERM. Does my hon. Friend agree that my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) was in danger of misleading the Committee by saying that there was some doubt? Is it not abundantly clear that we are going back into the ERM? There is no doubt about it whatsoever, and it will be another great disaster for jobs.

Mr. Winterton: As yet, I am not able to speak for the Government. I am not being immodest when I say that there are some who believe that I might make a better job on the Treasury Bench than some of those who occupy it now.

Mr. Cash: Just in case my hon. Friend should be in any doubt whatsoever about the Government's position, I hope that, in common with other hon. Members, he noted that, when my hon. Friend the Member for Southend, East (Mr. Taylor) made his point about that scurrilous piece of paper from the European People's party, the Minister nodded his head in agreement and is now nodding again, so there is no doubt that the Government intend to take us back into the exchange rate mechanism.

Mr. Winterton: Having sat through many hours of the debate today, my hon. Friend the Minister indicated that there was an option to re-enter the ERM, but, not seeking to be unfair to my hon. Friend or to my right hon. Friend the Prime Minister, let me say that they have made it clear that we will not go back into the European exchange rate mechanism until the Government believe that it is right to do so. By that, they imply that it would be in the interests of this country to do so.
Before I give way to my hon. Friend on the Front Bench, may I say to my hon. Friend the Member for Southend, East that it is absolutely scandalous that the money which the Conservative party raises has gone to produce this ridiculously nonsensical, irresponsible, irrelevant and obsolete document from the Euro-MPs who are members of the Conservative party.

Mr. Cash: The European People's party. It is nothing to do with us.

Mr. Winterton: Or the European People's party, which, I am afraid, undoubtedly receives money from the United Kingdom's contribution to the European committee. But I do not think, Mr. Lofthouse, that you wish us to go into that matter.

Several hon. Members: rose—

Mr. Winterton: Please would my hon. Friends contain themselves? I see my hon. Friend the Financial Secretary pensive and pregnant with anticipation of the question that he is going to put to me.

Mr. Dorrell: I am grateful to my hon. Friend, but, rather than have my views attributed to me and then have some of my hon. Friends say that I was indicating assent to their formulation of the Government's policy, perhaps I may be allowed to confirm what I said two or three hours ago, which is that the Government's policy in relation to the exchange rate mechanism is to return to it when we consider it to be in this country's interest to do so.

Mr. Winterton: I entirely disagree with the policy of going back in, but I hope that my hon. Friend will accept that I interpreted what he said some three hours ago fairly accurately in my response to my hon. Friend the Member for Southend, East.

Mr. Bill Walker: rose—

Mr. Winterton: I shall give way in just a moment—

Mr. Austin Mitchell: rose—

Mr. Winterton: I am delighted to give way to the hon. Member for Great Grimsby (Mr. Mitchell), a fellow officer of the all-party media group, not least because I am attracted by his tie.

Mr. Mitchell: The position that the Minister has just given us is a much closer advance to membership than the


position when we came out, which was that we would not go back until the fundamental fault lines of the ERM had been repaired.

Mr. Winterton: I know that this sounds repetitive, but again I can only agree with everything that the hon. Gentleman has just said. Certainly, when we came out, it was my understanding of the Government's position that we would not go back in until the whole thing had been reviewed and restructured. We have seen it in the sort of drip, drip, drip syndrome that we have become accustomed to from this Government. We have been told that certain things will not happen, but, in case they do happen at some time in the future, we are building up the structure to enable them to happen.

Mr. Bill Walker: Does my hon. Friend, with his business background, agree with me that one of the problems of making business decisions is trying to forecast the position in six or 12 months' time? Part of the problem of decision-making, in which I have often been involved, is having to make a judgment based on what one thinks will be the future economic and political circumstances. It is particularly important when one is interested in overseas markets, something in which companies are interested. Therefore, a statement to the effect that we will go back into the ERM when the Government judge that the circumstances are right is much worse than a clear-cut statement to the effect that we will join and these are the circumstances under which we will join, clearly laid out—and we have not had that—or, alternatively, a statement to the effect that we will not join at all. Either of these allows decisions to be made.

Mr. Winterton: My hon. Friend, in yet another excellent intervention, has made a point that I trust the Treasury Bench will note. Those of us who are in business and have to take decisions for which we are accountable in every sense of the word need decisions, and I say to my hon. Friend the Financial Secretary that one of the reasons why I am strongly opposed to this protocol on the excessive deficit procedure is that a country might well need to have much more than 3 per cent. of gross domestic product as a deficit for a limited period in order to achieve a certain objective.
It is the same in business—one can borrow heavily. I advocate borrowing heavily only when one expects to get the money back with a profit that will enable one to pay back the debt. My hon. Friend's comments are extremely important.

Mr. Cash: My hon. Friend may not know that an interesting paper was prepared—it seems by Treasury officials—entitled, "Sterling in the ERM: Lessons from the September 1992 Crisis". It happened to arrive in my post in a brown envelope and is otherwise known as a leaked document. My hon. Friend may find it interesting to know that, with respect to the manner in which those things are supposed to be dealt with, the document states:
The results of these discussions should be communicated by the officials concerned to Finance Ministers. Special meetings of Finance Ministers are best avoided since they attract such public attention. Secure video conference facilities would enable Finance Ministers to talk to each other without meeting.

There is much more, as I shall explain to the Committee when I have an opportunity to speak. It is a remarkable inside document on what really goes on and what Ministers are up to.

Mr. Winterton: I hope that my hon. Friend will be prepared to make that document available to his colleagues and to let it lie on the Table, although perhaps the Chair would not consider it to be a state paper. It appears that it may come from some official source and it may also indicate official advice to Ministers from qualified people within a Government Department, and it is therefore relevant for it to be drawn to the attention of the Committee.

Dr. Godman: Given that we small band of men and women are engaged upon the parliamentary task of scrutinising the documents, line by line, I wonder whether the hon. Gentleman can help me. Can a member state, bedevilled by severe economic difficulties, seek a derogation from the provisions of article 104c?

Mr. Winterton: Like the hon. Gentleman, I am not a lawyer. On many occasions during the debate he has said that it would be most helpful to the deliberations of the Committee if a Law Officer, such as the Attorney-General, were here to assist us with the sort of question that he has asked me as a Government Back Bencher.

Sir Teddy Taylor: The answer is no.

3 am

Mr. Winterton: Exactly. My hon. Friend has anticipated my response. The answer to that question would be no. Any derogation would have to be granted before the treaty is ratified and signed, so the country suffering exceptional economic difficulties could not seek a derogation. I presume that under the protocol on the excessive deficit procedure, and other procedures that go with it, an explanation could be provided to that errant member country, and perhaps a less severe penalty would be imposed. I am being gracious and courteous towards the rather repressive and oppressive procedures that are laid down and that inhibit growth and the freedom of Governments to deal with the problems of their economy.
It is not in the Government's interests to emphasise that the plight of the United Kingdom is worse than that of any other country, or to point the finger of blame at the ERM. We all know that the ERM is to blame, but high interest rates to keep our exchange rates in line with those of Germany have wreaked havoc on business. As I have intimated in interventions, they also account for 1 million of the more than 3 million people who are unemployed. It is as simple as that. As we are talking also about deficits, I repeat that, in this respect, the Government's European policy is costing this country £8 billion.

Sir Teddy Taylor: My hon. Friend has obviously studied this matter very carefully. Perhaps he could clarify something that I do not understand. If a member state, under article 104c, is instructed to increase taxes very substantially because of an excessive PSBR, and if the result is more unemployment and an even greater PSBR, is that state automatically fined for following instructions?

Mr. Winterton: This is one of the points made very dramatically and forcefully by the right hon. Member for Bethnal Green and Stepney.

Sir Teddy Taylor: What is the answer?

Mr. Winterton: The answer is that I assume that such a state would be fined.

Sir Teddy Taylor: For doing what it had been told?

Mr. Winterton: Indeed—for creating a deficit even greater than the one that was the cause of its being hauled before the monitor in the first place.

Mr. Wilkinson: In the most unfortunate absence of the Attorney-General, can my hon. Friend tell us what the outcome would be if a member state were fined for not keeping within the protocol's criteria on budget deficit and national debt? Refusal to pay the fine would seem to be the sensible course. Why should the misery of the people concerned be compounded?

Mr. Winterton: If this country were to follow the example of many members of the European Community—France, Italy, Holland, Belgium and even Germany—it would ignore most of the directives and regulations that are unhelpful. Those countries accept such directives and regulations but never implement them; and by the time the Commission catches up, it is too late, and the benefit has been gained.
As my hon. Friends have said, the Government want to return to the ERM, despite its dramatically damaging cost.

Mr. Cash: I can confirm what my hon. Friend has said.
The document from which I have already quoted, which was published—"published" is the wrong word; it was written—on 23 December 1992, concludes:
Sterling should re-enter the ERM when the following conditions have been met: German interest rates have come down; the Bundesbank in particular accepts the new parity as realistic…Sterling should re-enter with a narrow band.
In other words, the advice that is being given includes clear commitment. My hon. Friend may find that these conclusions are of some assistance.

Mr. Winterton: My hon. Friend, not for the first time, has anticipated the point of what is almost my next sentence. The Maastricht treaty, whose ratification we are considering, will commit the United Kingdom to returning to the ERM under the second stage of European monetary union. We could be committed to doing that from 1 January next—nine or 10 months away. We would be returning to the horror of that cage—indeed, the ERM—that caused so much trouble in this country, and at least one million job losses.
The Conservative Government believe that they have an opt-out of the third stage of EMU, and can decide later whether or not to join the single currency.

Mr. Cryer: On a point of order, Mr. Lofthouse. I apologise to the hon. Gentleman, whose speech I am enjoying—he will no doubt have the opportunity to resume his speech—but I beg to move, That strangers do withdraw.

Notice being taken that strangers were present, the FIRST DEPUTY CHAIRMAN, pursuant to Standing Order No. 143 (Withdrawal of strangers from House), put forthwith the Question, That strangers do withdraw:—

The Committee proceeded to a Division—

The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse): I understand that we are having difficulty over the Doorkeepers, many of whom will be

needed later in the morning. The Doors to my immediate left and my immediate right are locked, so hon. Members will have to use the other Doors.

The Committee having divided: Ayes 0, Noes 183.

Division No. 206]
[3.10 am


AYES


Nil



Tellers for the Ayes:



Mr. Bob Cryer and



Mr. Dennis Skinner.



NOES


Ainsworth, Peter (East Surrey)
Goodson-Wickes, Dr Charles


Aitken, Jonathan
Gorst, John


Alexander, Richard
Greenway, John (Ryedale)


Amess, David
Grylls, Sir Michael


Arbuthnot, James
Gummer, Rt Hon John Selwyn


Arnold, Jacques (Gravesham)
Hague, William


Arnold, Sir Thomas (Hazel Grv)
Hamilton, Rt Hon Archie (Epsom)


Atkinson, Peter (Hexham)
Hampson, Dr Keith


Baker, Nicholas (Dorset North)
Hanley, Jeremy


Baldry, Tony
Harris, David


Banks, Matthew (Southport)
Hawkins, Nick


Barnes, Harry
Hayes, Jerry


Bates, Michael
Heald, Oliver


Beresford, Sir Paul
Heathcoat-Amory, David


Booth, Hartley
Hendry, Charles


Boswell, Tim
Hill, James (Southampton Test)


Bottomley, Peter (Eltham)
Hordern, Rt Hon Sir Peter


Bowden, Andrew
Howarth, Alan (Strat'rd-on-A)


Bowis, John
Hunt, Rt Hon David (Wirral W)


Brandreth, Gyles
Hunt, Sir John (Ravensbourne)


Brazier, Julian
Hunter, Andrew


Bright, Graham
Jack, Michael


Brooke, Rt Hon Peter
Jones, Gwilym (Cardiff N)


Browning, Mrs. Angela
Jopling, Rt Hon Michael


Burt, Alistair
Kellett-Bowman, Dame Elaine


Carlisle, Kenneth (Lincoln)
Kennedy, Charles (Ross,C&S)


Carrington, Matthew
Key, Robert


Channon, Rt Hon Paul
Kilfedder, Sir James


Chapman, Sydney
Kirkhope, Timothy


Churchill, Mr
Kirkwood, Archy


Clarke, Rt Hon Kenneth (Ruclif)
Knight, Mrs Angela (Erewash)


Clifton-Brown, Geoffrey
Knight, Greg (Derby N)


Coe, Sebastian
Knox, David


Congdon, David
Kynoch, George (Kincardine)


Coombs, Simon (Swindon)
Lait, Mrs Jacqui


Cope, Rt Hon Sir John
Legg, Barry


Couchman, James
Leigh, Edward


Curry, David (Skipton & Ripon)
Lester, Jim (Broxtowe)


Davis, David (Boothferry)
Lidington, David


Davis, Terry (B'ham, H'dge H'l)
Lightbown, David


Day, Stephen
Luff, Peter


Deva, Nirj Joseph
Lyell, Rt Hon Sir Nicholas


Dorrell, Stephen
MacGregor, Rt Hon John


Douglas-Hamilton, Lord James
MacKay, Andrew


Dover, Den
Maclean, David


Duncan, Alan
McLoughlin, Patrick


Duncan-Smith, Iain
Maitland, Lady Olga


Dunn, Bob
Malone, Gerald


Elletson, Harold
Mans, Keith


Emery, Rt Hon Sir Peter
Martin, David (Portsmouth S)


Evans, Jonathan (Brecon)
Mawhinney, Dr Brian


Evans, Nigel (Ribble Valley)
Merchant, Piers


Evans, Roger (Monmouth)
Milligan, Stephen


Evennett, David
Mitchell, Andrew (Gedling)


Faber, David
Monro, Sir Hector


Fabricant, Michael
Moss, Malcolm


Fenner, Dame Peggy
Nelson, Anthony


Fishburn, Dudley
Neubert, Sir Michael


Forsyth, Michael (Stirling)
Newton, Rt Hon Tony


Forth, Eric
Nicholls, Patrick


Fox, Dr Liam (Woodspring)
Nicholson, Emma (Devon West)


Gale, Roger
Norris, Steve


Gallie, Phil
Oppenheim, Phillip


Garel-Jones, Rt Hon Tristan
Page, Richard


Gillan, Cheryl
Paice, James


Godman, Dr Norman A.
Patnick, Irvine






Pattie, Rt Hon Sir Geoffrey
Temple-Morris, Peter


Pickles, Eric
Thomason, Roy


Porter, Barry (Wirral S)
Thompson, Patrick (Norwich N)


Portillo, Rt Hon Michael
Thornton, Sir Malcolm


Powell, William (Corby)
Thurnham, Peter


Rathbone, Tim
Townsend, Cyril D. (Bexl'yh'th)


Redwood, John
Tracey, Richard


Renton, Rt Hon Tim
Trotter, Neville


Richards, Rod
Twinn, Dr Ian


Robathan, Andrew
Viggers, Peter


Roberts, Rt Hon Sir Wyn
Walden, George


Robertson, Raymond (Ab'd'n S)
Waller, Gary


Robinson, Mark (Somerton)
Wardle, Charles (Bexhill)


Rowe, Andrew (Mid Kent)
Waterson, Nigel


Ryder, Rt Hon Richard
Wells, Bowen


Sackville, Tom
Wheeler, Rt Hon Sir John


Shaw, David (Dover)
Whitney, Ray


Shepherd, Colin (Hereford)
Whittingdale, John


Smith, Tim (Beaconsfield)
Widdecombe, Ann


Spencer, Sir Derek
Willetts, David


Spicer, Sir James (W Dorset)
Wolfson, Mark


Spink, Dr Robert
Yeo, Tim


Sproat, Iain
Young, Sir George (Acton)


Stanley, Rt Hon Sir John



Stephen, Michael
Tellers for the Noes:


Stewart, Allan
Mr. Timothy Wood and


Streeter, Gary
Mr. Robert G. Hughes.


Sykes, John

Question accordingly negatived.

Dr. Godman: On a point of order, Mr. Lofthouse. Given the reduced number of doorkeepers on duty, will you confirm that if there are to be more Divisions throughout the night, the doors that remain locked are those over your right shoulder, and those over my left shoulder?

The First Deputy Chairman: Yes, I can confirm that.

Mr. Nicholas Winterton: When my contribution to the important debate on this group of amendments was interrupted some minutes ago, I was advising the Committee that the Government believe that they have an opt-out from stage 3 of European monetary union and can decide later whether or not to join the single currency. I remind the Committee that under article 109m of the treaty of Rome, the Commission or another member state can take the United Kingdom to the European Court of Justice for not behaving "in the common interest". I submit, therefore, that opt-outs are probably not worth the paper they are written on. We should not base support for the Maastricht treaty on an opt-out that is as yet untested in the European Court.
It was mentioned in an earlier debate—but this has a major bearing on Government economic policy—that under the treaty we are likely to surrender certain rights to the European central bank. They include our ability to control interest and exchange rates, to issue bank notes, control foreign reserves, and—particularly relevant to this group of amendments—to control the level of Government deficit. Government spending and policies would therefore be handed over to six unelected bankers in Germany—I am not sure yet whether the central bank will be in Bonn or Frankfurt. As the right hon. Member for Bethnal Green and Stepney made clear, they will have an eight-year tenure and can only serve one tenure. As they can serve only one tenure, the bankers will not care whether they please or displease.
We know, because we have been told, that those individuals can be removed by the European Court of Justice only on a technicality, not for getting their policies

wrong. Here in the Westminster Parliament, if a Government get their policies wrong and lose the support of the people, they can be turned out after four or five years. That does not apply to these distinguished individuals, these highly remunerated individuals, these individuals who ultimately need not be accountable for their policies, whatever problems they create for the countries that comprise the European Community.

Mr. Cash: My hon. Friend may be glad to know that, referring to the central bank's governors, this remarkable document states:
Since there will always be a trade-off between domestic macro-economic management and exchange rate policy, this aim is perhaps utopian.
Even this extraordinary document admits that the basis on which the decisions are made is utopian: in other words, the authors do not even believe in it themselves.

Mr. Winterton: I believe that the author of "Utopia" was Sir Thomas More. There is a plaque commemorating him in Westminster Hall. Perhaps we are fortunate to be as close to Utopia in this country as we will ever be. I would not want that Utopia to be in any way diluted by a system in which all our affairs were controlled by the European central bank, whether based in Frankfurt or in Bonn.
Around such a bank, as I think we are all aware from the excellent speeches made so far, will be an immensely powerful group of people whom I have already described. For example, according to the statistics that I have before me, under Maastricht control the convertible currency reserves of all member states, which totalled £1,761 billion at the end of 1991, will inevitably become subject to fund management by the new European central bank.
Banking and currency businesses will take thousands of jobs away from an organisation not so very far from the Palace of Westminster—the City of London. Yes, this new set-up—this new central bank of Europe, or European central bank-could well deprive London and its financial centre of thousands of jobs. The City of London originally grew up around the Bank of England. As the Bank of England becomes a branch of the European central bank, perhaps rather a second-rate branch—it is all here in the treaty—so the City of London, which is important to the country and its economy, will contract. With Maastricht, we are committed to a re-run of the past three years—to a slowing and then a shrinking of our economy.
My interest in industry leads me to the subject of convergence. The requirement in the treaty for convergence is one of the most important policies affecting industry in this country, and Britain will be committed to it irrespective of the opt-outs—or whatever they were—negotiated by my right hon. Friend the Prime Minister. As the Committee will know, convergence consists of financing the industries of less well-developed European countries so that they can compete with our own. In other words—I think that this has been said before by hon. Members who are concerned about the treaty—Maastricht will set up an industrial equivalent of the common agricultural policy.
How many hon. Members who are present at this early hour of the morning are aware that many of our traditional industries have already faced severe competition from some of the new members of the European Community? I refer in particular to Portugal and Spain. The paper and board industry, with which I have been


closely involved for many years, has lost not only through companies collapsing but through thousands of jobs going to Spain, in particular, and to a lesser extent to Portugal because of the assistance that those countries receive from various structural and improvement funds, to which we are the second largest contributor. We are positively contributing to transfer of jobs from the United Kingdom to other EC countries.

Mr. Wilkinson: My hon. Friend is making a crucial point. The British public would be horrified, and I hope that his speech will percolate through. Are there not first three EC countries with which we have a balance of payments surplus—Ireland, Spain and Greece? We no longer have one with Portugal. If the transfer of funds under the Maastricht process continues, there will not be one member of the European Community with which the United Kingdom has a balance of payments surplus.

Mr. Winterton: My hon. Friend is absolutely right, and I entirely endorse his view. If the people of this country realised what the Government were doing in their name, they would be extremely angry and would respond appropriately when the opportunity arose. It is vital that the United Kingdom does not accept the proposals.
My hon. Friend the Member for Southend, East is not in his place at the moment, but he is extremely well informed about the common agricultural policy. It is notorious for its cost and its waste. As many hon. Members are aware, it costs £1,000 a year for every four-person household in Britain. It is depleted by fraud and inefficiency, and only about 50 per cent. of every £1 reaches the farmers for whom it is intended. As I have said, the budget which is drained by the CAP is a budget to which the United Kingdom is the second biggest contributor.
I now touch on an issue to which I trust that the House will turn its attention later today if the business managers permit it. In March this year, The Guardian—a newspaper that I read although I do not always agree with it—pointed out that the United Kingdom pays France enough money for electric power to keep the equivalent of six British coal pits in operation. Six mines, in addition to those which we hope will be reprieved by the President of the Board of Trade later today, could be kept open, but we pay the money to France instead and put our miners out of work.
Convergence under the Maastricht treaty will mean the United Kingdom paying more money, hand over first, to industries in Spain, Portugal, Greece and Ireland. A number of hon. Members—no doubt including some of those facing me across the Chamber—might believe that that is a good thing. In the past year or two, I motored through Spain on my way to a holiday in Portugal. I was appalled by the number of road projects for which those countries have received funding from the European Community, making them more attractive and competitive than the United Kingdom. The people of this country do not want or support that. I believe that if they knew that it was going on to that extent they would register their firm opposition with the Government.

Mr. Charles Kennedy: Will the hon. Gentleman give way?

Mr. Winterton: I am delighted to give way to the president of the Liberal Democrats, with whom, despite our many differences, I share considerable common ground.

Mr. Kennedy: I am grateful to the hon. Gentleman for giving way, but he is systematically slashing to bits those of us who are attempting to contribute to the debate before we even intervene. I do not know to which road projects he specifically referred, but I suggest that countries such as Spain may appear to have more road infrastructure projects supported by EC funding because, unlike this country, they do not systematically and persistently abuse the concept of additionality for European regional development fund cash.

Mr. Winterton: I am not sure whether I have the information readily to hand to be able to answer the hon. Gentleman's question fully, as normally I would wish to do, but I can tell him that the United Kingdom, perhaps stupidly, is one of the most honourable countries in the Community and implements any regulation or directive that the Government accept, even if they have accepted it unwillingly. We cross all the t's, dot all the i's and put full stops at the end of all the sentences. We are as communautaire, as honourable, as any country in the Community. Indeed, in my view we are considerably more honourable than most.
I am not sure what sort of response to his question the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) expected from me.

Mr. Kennedy: rose—

Mr. Winterton: I give way to the hon. Gentleman again, if he insists.

Mr. Kennedy: How could the hon. Gentleman know what kind of reply I wanted? I did not expect the reply that he gave but, equally, he will not have expected me to agree with the one that I thought that he would give. I did not want to agree with that in the first place.

Mr. Winterton: The hon. Gentleman is always most courteous and most charming, and it is difficult to disagree with him in an aggressive way. He seems to agree with the response that I actually did give him, although I could not reply to the specific question that he asked.
It has not been mentioned much in our debates that convergence is a critical cost upon the people and the industry of this country. Some people argue that, if Britain finances the development of other EC countries they will then become customers of Britain's manufacturing companies and take our goods. The falsity of that idea is shown by the trade figures to which my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) has already alluded. The only EC countries with which the United Kingdom has a favourable balance of trade are two of the three poorest nations. That does not suggest that, as the Government may say, the more money we pour into other countries and the better we make them, the more business we shall do with them. The record shows that that does not happen.
Because of my total commitment to the role of manufacturing industry in the economy of this country, I again ask the Government why, if they believe in spending money to invest in industry, they do not invest in United Kingdom industry. I ask that with a great deal of venom,


and I repeat what I said earlier in my short contribution to the debate—that when I sought to concentrate the mind of a responsible Department, the Department of Trade and Industry, on areas in which we might achieve import substitution and a regeneration of sectors of this country's manufacturing base, I got from the Minister for Industry the unhelpful response that the Department could not possibly do that because it would contravene the treaty of Rome, and the Commission would come down on us like a ton of bricks. What a load of wimps they are. Is it not about time that we stood up for the interests of manufacturing industry and jobs in the United Kingdom?
My hon. Friend the Financial Secretary has been sitting on the Front Bench for rather too long. I am amazed that he has not been relieved, as I believe that merits—

Mr. Cash: Does my hon. Friend agree that one of the tragedies of the Government's policy on the trade matters to which he is referring is that we are running a multi-billion pound deficit with the European Community? We are in an absolutely ridiculous situation. We are receiving orders from unelected officials and subscribing to a Euro-framework—which, good though it may be in theory, needs to be sorted—while at the same time running that massive deficit.

Mr. Winterton: Yes, and our deficit with Europe has been increasing ever since we joined. I have long believed that the United Kingdom should look to the four corners of the world for trade and customers and should not be blinded by Europe or concentrate all its efforts on the European Community. One day, we shall learn that the European Community is only a small part of the overall trading world. We should look to north America, where the economy is growing rather faster than almost anywhere in Europe. I believe that there are rich pickings to be had if only we would turn our eyes in that direction.
I pay tribute to the Government for one or two of the measures that they introduced in the Budget—not least the increase in the moneys available under Export Credits Guarantee Department schemes and the more competitive premiums now available to industry. That will undoubtedly enable the United Kingdom to bid for very important contracts in the far east, Indonesia and elsewhere, where there are, I repeat, very rich pickings as regards employment and manufacturing.

Mr. Stephen Day: My hon. Friend and I were heavily involved in trying to secure for British Aerospace the deal that it has recently secured with Taiwan Aerospace. My hon. Friend knows the great importance of British Aerospace both to our constituents and to the United Kingdom in general. He will also, I believe, have received from British Aerospace—I shall be surprised if he has not—a letter asking Parliament to ratify the Maastricht treaty immediately because the company feels that it is of major importance to it. Will my hon. Friend address that point, as he gives me the impression that he believes that there is some conflict of interest—a belief which British Aerospace, one of the major employers, does not seem to share?

Mr. Winterton: My hon. Friend tempts me to start my speech again, but I know that you, Mr. Lofthouse, would not wish me to go back over the brief comments that I have made so far. If my hon. Friend had read one of those distinguished, more serious newspapers on Sunday—I

refer to The Sunday Telegraph, although I believe that the story also appeared elsewhere—he would be aware that a certain amount of disinformation and misinformation is being peddled—[Interruption.] I shall come to inward investment in a moment. A great deal of disinformation is being peddled about the support of industry for the Maastricht treaty. The Institute of Directors, which is surely fairly representative of big business, is strongly opposed to the Maastrich treaty, for a number of the reasons that I have spelt out to the Committee during my speech.
I know from my knowledge of many members of the CBI that they, too, oppose Maastricht, as do many small business men. But with the political patronage available to Government, certain people who head major companies and who in the past, by tradition, have automatically been rewarded with honours, have done what they perceive is expected of them. I refer without malice, for example, to the chairman of ICI, who was a signatory with other leading business men—the Arnold Weinstocks of this world, the leaders of British Aerospace and others. I am not sure that they are committed to Maastricht in a meaningful way. Indeed, I am not sure that any of them have read the Maastricht treaty, together with or separately from the Single Act and the treaty of Rome, although all three must be read to understand the position fully.

Mr. Wilkinson: Is it not a fact that major aerospace companies, such as British Aerospace, have collaborated over the years with European and other partners, as Boeing co-operates with the Japanese, the Italians and many others, on purely commercial and technical grounds? They find the partners who best suit their commercial and technical requirements. It has nothing to do with Maastricht.

Mr. Winterton: I agree absolutely with my hon. Friend who, speaking from the heart and the head—because few in the Committee know as much about certain sectors of industry, including aerospace, as he does—puts it in a nutshell.
My hon. Friend the Member for Cheadle (Mr. Day) drew my attention to certain senior executives of British Aerospace. I could introduce him to many executives who take a totally contrary view over the ratification of Maastricht. But does our ratification of it make the slightest difference to the excellent arrangement that British Aerospace has entered into with the Taiwan Aircraft Corporation in a joint venture for the design, manufacture, marketing and sale of their regional jet aircraft? It does not.
As I anticipate a third partner for British Aerospace in that joint venture, does my hon. Friend the Member for Cheadle believe that if that partner does not come from the European Community, that third partner's participation will be affected by whether or not we ratify the Maastricht treaty? Being a close neighbour to my constituency, I am sure he will reply that it will have no bearing whatever.

Dr. Godman: The hon. Gentleman referred to our shrinking manufacturing base. He will be aware of industries which utilise wide-ranging skills. For them, we are almost at the point of no return. For example, P & O recently ordered two cruise liners, not from a United


Kingdom yard but from German and Italian yards. Not one British merchant yard bid for those two lucrative contracts. The European Commission is denying our warship yards the right to bid competitively for such merchant contracts, and I fear that, within 10 years, we may not possess the skills to enable us to build such advanced vessels.

Mr. Winterton: The hon. Gentleman has drawn that and similar matters to the attention of hon. Members on previous occasions. He raises a valid and important point. Sadly, the Government—this applies to Governments of both parties—have sold our manufacturing base short and have failed to support it in various forums. The sort of matter which the hon. Member for Greenock and Port Glasgow has drawn to my attention is valid because, once that skill has left our shores, it will never be replaced. As the hon. Gentleman is from that part of the country, he knows that that skill has been a huge earner of money for the United Kingdom and a huge employer of labour in the past.

Mr. Cash: I do not wish in any way to preempt anything that my hon. Friend may say in his excellent speech. I refer to the Confederation of British Industry, the Institute of Directors and, indeed, the Federation of Small Businesses. The Federation of Small Businesses has not been mentioned in this debate—I addressed its annual conference in Bournemouth recently. About 60,000 members have endorsed the call that I and many others have made for a referendum. Does my hon. Friend agree that the absolutely extraordinary report of the Confederation of British Industry demonstrates that there are no substantial grounds whatever for these continual smears and allegations that failure to ratify the Maastricht treaty will affect inward investment into the United Kingdom in any material way?
The Confederation of British Industry sent the report to Members of Parliament and peers. The report gave a totally misleading impression, which is remarkable. Does my hon. Friend agree that the report sets out what will happen if we do not ratify the Maastricht treaty? For example, a major computer manufacturer in the United States says:
A United Kingdom decision to stay out of the ERM would not affect our decision on United Kingdom investment. In so far as possible, UK policies on Maastricht, a two-tier Europe and withdrawal from the EC and investment decisions would not be affected.
That is typical.

Mr. Winterton: I am happy to answer by saying yes and yes to my hon. Friend's questions. I believe that the Confederation of British Industry received a nod and a wink and that the specific briefing document was sent out at the request of certain political friends, who may have been in Government. Subsequent to the issue of the report, many members of the CBI have said that they do not agree with many of the comments in it.
My hon. Friend the Member for Stafford (Mr. Cash) has anticipated another area to which I wish to refer—Maastricht and the single market. That is important with regard to our economic policy and has a direct bearing on the Government's deficit. It is not said often enough or forcefully enough that Maastricht has next to nothing to do with the single market.
At one time, we were repeatedly told that the single market could not come into force unless the treaty was ratified. Maastricht has not been ratified, and the single market has been with us since 1 January. The single market has been with us since 1 January, even though—dare I say it—Germany has not ratified the treaty because of a technicality. I am not sure when Germany will ratify the treaty. The point that we will remain in the single market even if we do not ratify the treaty should be made time and again to our trading partners, especially those outside the European Community.
I suspect that those well-informed gentlemen in the top echelons of Centrepoint—I refer to the CBI—have deliberately misunderstood this, believing that the single market will collapse and our membership of the single market will end if we do not ratify the treaty.

Sir Ivan Lawrence: My hon. Friend is making a most impressive speech, and is using some material which is obviously well informed. He made the point before about British business men. They believe that signing up for Maastricht will save their businesses. They believe, because they have been told it and they have not read the treaty and do not understand anything about what it means, that they would have to leave the Common Market if the treaty was not ratified. They are told that time and time again.
I was in Copenhagan last week. People there who said no in the referendum because they believed that it was not in the interests of Denmark to sign up to Maastricht are now being told left, right and centre that, if the treaty is not ratified, they will be out of the European Economic Community and all their businesses will collapse. Whoever one asks says exactly the same thing—that they will be left out of Europe if they do not sign up. Something has to be done to bring an element of honesty back into government and business so that that particular myth is killed.
My hon. Friend may be coming shortly to the views of the chief executive of Jardine Matheson, who wrote a letter to the The Times and telephoned around leading business men. He found that most of them believed that the future was not in the signing of Maastricht.

Mr. Winterton: Representations have been made to me by Jardine Matheson, but as my hon. and learned Friend has given the information to the House, I know that you would say that I was being repetitive, Mr. Lofthouse, if I repeated it to the Committee. My hon. and learned Friend's request for honesty should be answered by the Government and the CBI and all the other organisations which have peddled inaccurate and biased information, for whatever reason.
Before I come to the next issue, I return to the Budget. Again, it is relevant to economic policy and the deficit. The deficit is particularly relevant to the matter that I wish to raise. The Government have decided to extend value added tax to heat and light. I wonder why they chose to do that. Was it to reduce the deficit? That was the explanation provided by the Chancellor and other Ministers. Perhaps, Mr. Lofthouse, you will say that I am being too suspicious. Perhaps I am not trusting enough of my colleagues on the Treasury Bench. Did they extend VAT to bring the tax structure and the base of value added tax in Britain more in line with the rest of the EC?
I wonder what further measures my right hon. Friend the Chancellor will announce to the House in the years


that lie ahead. He has extended VAT to heat and light. I did not support that, and I will not support it unless he provides certain assurances to me that the vulnerable groups, whom we all know about, are fully and adequately covered.

Mr. Barry Porter: I can think of better things to do at 4 o'clock in the morning. I would not mind if we were discussing what is before the Committee, but in the past half hour I have heard a broad onslaught on the treaty of Rome, the Single European Act and the general wickedness of the European Community. It is not possible for you to bring the speeches into order, Mr. Lofthouse, so that they deal with the Maastricht treaty and nothing else?

The First Deputy Chairman: Order. That is a matter for the Chair. However, on occasions my patience has become somewhat exhausted because the hon. Member for Macclesfield (Mr. Winterton) has ventured into industrial policy, whereas the amendments deal with economic policy. If the hon. Gentleman would bear that in mind, I would be extremely grateful.

Mr. Winterton: Of course I fully accept the view that you have just expressed, Mr. Lofthouse, and as a member of the Chairmen's Panel I accept without question the ruling of the occupant of the Chair. You have always been impeccably fair whenever I have taken part in any debate in the Chamber. However, if industrial policy and the importance of manufacturing are not inextricably entwined with economic policy, I do not know—

The First Deputy Chairman: Order. As the hon. Gentleman is fully aware, there has been a separate debate on industrial policy.

4 am

Mr. Winterton: Sadly, on that occasion I did not succeed in catching your eye because, yet again, the Government sought to short-circuit debate in the House on a vital constitutional issue and I was unable to make a speech. I do not wish to get out of order, Mr. Lofthouse, or to tempt you to rise to your feet again, but the issues that I have touched upon are relevant to economic policies and deficits.
If my hon. Friend the Member for Wirral, South (Mr. Porter) doubts my reference to value added tax on heat and light, he will know that the Chancellor apparently introduced that policy to reduce the Government deficit. He may have done it partly for that reason, but I am suspicious that he has done it to bring the base of taxation in Britain closer to that of the European Community and I am strongly opposed to that.
Once again, I am referring to the deficit and my hon. Friend the Member for Wirral, South is tempting me, provoking me and forcing me to go further. Having introduced that measure, we are putting a number of vulnerable groups into grave financial difficulty. As a result, the Government will have further to increase the deficit in order to increase the pension and raise by the appropriate amount state income-related benefits and income support.

Mr. Bill Walker: Is not my hon. Friend saying that the redeeming feature was that it was our Chancellor who took the decision to adjust the deficit or do whatever he wished with it? The amendments are about whether or not

the House, the Chancellor or any future Chancellor will have the opportunity to do just that. That is what the debate is all about.

Mr. Winterton: My hon. Friend is correct in that we wish the House to have the authority to decide economic policy in all the areas that I said would be handed over to the European central bank, for example, if the Maastricht treaty is ratified, and inevitably other measures that are in the pipeline would follow.
Let me now move on to Maastricht—[Interruption.] Perhaps my hon. Friends are inexperienced in theatrical delivery and did not take account of the pause. I was about to move on to Maastricht and inward investment, which is closely tied up with economic policy.
Inward investment into Britain comes from a number of sources such as the United States and Japan. As my hon. Friend the Minister is inclined to talk, lecture and ram down our throats in economic and other debates in the House, we have been an extremely successful recipient of inward investment. This has been a notable ingredient of our economic success, particularly during the 1980s.
I would like to give a number of reasons for that investment. I pay tribute to the United Kingdom Government, a Conservative Government, for their sympathetic and positive attitude to inward investment. Also, dare I say it—and in no way seeking to upset the nationalists, who are not here, although we have with us the president of the Liberal Democrat party—the English language is one of the reasons why we get inward investment. English is especially important for the Japanese whose second language it is. Another reason is the culture of this country.

Sir Ivan Lawrence: My hon. Friend and the Committee might like to know that two weeks ago I asked a Japanese ambassador if our not signing Maastricht would mean the withdrawal of the Japanese investment in Toyota, which is just outside my constituency. He said that, provided that not signing Maastricht did not mean that Britain would come out of the European Community, there would certainly be no withdrawal of investment, thereby making two points. The first was that their investment is in Britain because we are in the European Community. The second and sinister point, which links up to the point that I made when last I intervened in my hon. Friend's speech, was that there is still the idea going round that if we do not sign Maastricht we will be out of the European Community. That idea must be killed.

Mr. Winterton: My hon. and learned Friend makes the point extremely well, so much so that if ever I need a lawyer he will certainly be my man because he expresses the case so positively, so forcefully and so accurately.

Sir Trevor Skeet: Perhaps I can endorse what has just been said, in alignment with my hon. Friend's own speech. Mr. George, the incoming Governor of the Bank of England, is reported as follows in the Financial Times of 3 March 1993:
He told a seminar organised by British Invisibles, the export promotion body for services, that the City's position depended on the completion of the single market rather than monetary integration.
That, I think, is conclusive.

Mr. Winterton: I can only say that I am eternally grateful to my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), whose knowledge of industry and


certain sectors important to our economy is well respected. The point that he has made is a good one—and far be it from me to argue with the future Governor of the Bank of England. I entirely endorse the view that he has expressed.
Another reason why this country is so attractive for inward investment—I pay tribute to many hon. Members on the Opposition Benches, not necessarily on the Government Benches—is that we have a highly trained and highly productive work force. Given the opportunity to work, they work, and work very well. I suspect that my hon. and learned Friend the Member for Burton (Sir I. Lawrence) may seek to intervene again because I have had this out of the mouths of business men from Japan. They believe that our work force are even better than their work force, and they are very happy to come here for that reason. They are skilled, they are hard-working, they are committed—

Mr. Day: And released from the shackles of socialism.

Mr. Winterton: I will not enter into a party political debate, even though I am tempted to do so, because on this I am sure that I carry both sides of the Committee with me.
Again, they want to come to this country because of our strategic position and because we have a relatively good and improving infrastructure and communications.
I make this challenge on economic policy: think of the improvements created for industry and industrial efficiency, if only the Government would spend the £3 billion that we contribute to the European Community on this country's infrastructure. Think how many tens of thousands, or perhaps hundreds of thousands, it would put back to work, especially in the hard-pressed construction and allied industries.
Our membership of the European Community and the single market is important, but the ratification of Maastricht is of no importance.

Mr. Barry Porter: What are we doing here then?

Mr. Winterton: My hon. Friend is tempting me again. What is the Committee doing spending so much time on this confounded, irrelevant and unnecessary debate on the Maastricht treaty and the Eruopean Communities (Amendment) Bill? He also has the good sense to come from the north-west of England, albeit from the other side of what was the county of Cheshire, on the Wirral, and if only he would make the strong representations to the Government that I have suggested, perhaps this whole charade and farce would be brought to an end.
For all the reasons that I have described, the United Kingdom is recognised as a centre for inward investment by the Japanese. My hon. and learned Friend the Member for Burton referred to the huge investment by Toyota close to his constituency.

Dr. Godman: rose—

Mr. Winterton: Yet again, I am happy to give way to an informed Opposition Member.

Dr. Godman: The Japanese are not the only investors who are ready to acknowledge the high qualities displayed by our work forces. I met senior directors of IBM recently, in the immediate aftermath of the bad news that they recently had to announce. They assured me that the plant at Spango valley in Greenock was among the best in IBM

worldwide, and that it would always receive the support of the headquarters in America. They spoke very highly of the work force on the lower Clyde.

Mr. Winterton: The hon. Gentleman never misses an opportunity to advance the interests of his constituency and the interests and success of Scotland, which is such a vital part of the United Kingdom. I can only entirely agree with him.

Mr. Bill Walker: IBM had been in Scotland for a long time.

Mr. Winterton: My hon. Friend the Member for Tayside, North (Mr. Walker) agrees with the hon. Member for Greenock and Port Glasgow.
For all the reasons that I have given, the United Kingdom is recognised by the Japanese as a free-trading nation, with a distinguished and long tradition and an open attitude to world trade, which is epitomised by the City of London. For that reason, one is so saddened that the City has joined—for whatever reasons—the disinformation about business being almost entirely in favour of the ratification of the Maastricht treaty.
Our country attracts inward investment, but the same is not true of our major European Community partners, in particular France and Germany, for reasons that are well known to Conservative Members. It is unlikely, however, that inward investment will return in the immediate future to the levels of the 1980s, which were a build-up from a very low base of inward investment.
Japan is a very powerful country. Bearing in mind the strictures of my hon. Friend the Minister in the previous debate—if you will allow me about 15 seconds, Mr. Lofthouse—about the importance of an independent bank, the most economically successful country in the world has been, and still is, Japan, which has a central bank—the Bank of Japan—which is extremely dependent. It is not independent but extremely accountable to the Japanese Government. All the nonsense that Ministers talk about the vital role of an independent European central bank is similar to much of what they say.
Sadly, the Japanese now have a shortage of capital, and that is likely to continue for some time. They have had to withdraw some of their overseas investments and to cut back their banking and securities operations. Indeed, even those in the United Kingdom have had to be reduced. However, Japan is still a major investor in this country. As my hon. and learned Friend the Member for Burton has said, it has absolutely no intention of withdrawing its huge investment. Indeed, that investment will be added to. The only stipulated important criterion is that the United Kingdom should stay in the European Community. No Conservative Member suggests for one moment that we should come out.

Sir Teddy Taylor: What?

Mr. Winterton: I have never been able to speak with confidence on behalf of my hon. Friend the Member for Southend, East, although one of his luncheon clubs, at his suggestion, has asked me to speak in his constituency. I am very happy to have accepted the invitation, and I look forward to visiting Southend, East, where I know I shall come across a very large number of people who believe


that Maastricht is a total waste of time and should be shelved for good—if not, as some of my hon. Friends might say, just for the foreseeable future.

Sir Teddy Taylor: We want a credible case for staying in the EC. No such argument has been heard by the people to whom my hon. Friend refers. What we are facing up to now is nonsense, and what has happened under the Single European Act and the treaty of Rome has turned out to be a disaster for Britain and for democracy.

The First Deputy Chairman: Order. This group of amendments is not about coming out of the EC.

Mr. Winterton: Nor is it about going to speak in Southend, East, but I wanted to mention that visit in passing.
The fact that these amendments are not about coming out of the EC is important from the point of view of reassuring those countries that make considerable and important investments in the United Kingdom. Neither the United States nor Japan, despite their domestic difficulties, has withdrawn manufacturing businesses from this country. I only wish that our Government had as positive an attitude towards manufacturing as have many overseas investors. It is unlikely that either the United States or Japan will ever remove any manufacturing capacity from the United Kingdom. The very good reason, which will appeal to Conservative Members and—I say to the hon. Member for Liverpool, Walton (Mr. Kilfoyle)—to Opposition Members, I believe, is that their businesses here are highly profitable. Professor Williams' report to the CBI confirms this: most of the investment has already been made, and substantial follow-on investment from Japan is still to come but may be delayed because of the financial squeeze in that country.

Mr. Bill Walker: Does my hon. Friend agree that part of the deficit problem that the United Kingdom faces is accounted for by the fact that, for decades, we have been reducing substantially our ability to generate sufficient wealth to meet the expenditure that the Government have undertaken and added to? This situation has been brought about in part by the fact that the Japanese have been able to sell to the United Kingdom goods worth more than £7,000 million, whereas, as the most recent figures show, we sell goods worth just over £2,000 million to Japan. The Japanese have been able to penetrate the United Kingdom market and the market in the rest of the European Community. Thus Japan, which is not a member of the Community, has improved its deficit situation.

Mr. Winterton: I can only say that my hon. Friend the Member for Tayside, North makes an interesting and valid point. He has said that the Japanese are prepared to invest here because of the huge market to which that gives them access—perhaps the European Community has not had as much access to the Japanese market as the Japanese have had to the European market. It is to this country that the Japanese have wanted to come to locate their manufacturing.
The report of Professor Williams to the CBI continues in a manner that is relevant to our debate. It states:
Only a small number would see this"—
the non-ratification of the Maastricht treaty—
as having any major effect on their investment
those that come to this country with inward investment—

provided it did not lead to withdrawal or exclusion from the single market.
It is for that reason that I have grave concerns about the briefing document put out by the CBI to which my hon. Friend the Member for Stafford referred.
The argument so often advanced by Ministers of a two-speed Europe that will be to the disadvantage of the United Kingdom as we would no longer be at the heart of Europe is specious. Under the second and third stages to the run-up to the European central bank—the heart of Maastricht—countries will be able to unify their economies completely only when they have satisfied four convergent criteria. The latest date for the start of the European central bank is 1999, but it could start with only two member states as its members.

Mr. Michael Spicer: I appreciate that the debate is not about coming out of the Common Market, but does my hon. Friend accept that there is no single EEC country with a higher standard of living per capita income than any single country of the European Free Trade Association, including Austria and Finland—except Luxembourg? Does not that show that there is some sort of life to be had on the margins of Europe?

Mr. Winterton: My hon. Friend is correct to draw the Committee's attention to the fact that being a member of Europe is not necessarily a recipe for a successful and good-quality life. However, the currency and economy of Austria are quite closely linked to the deutschmark. I say that as one who has a skiing holiday there every year, as well as many friends there—we have a home quite close to the German border. Perhaps the Austrians gain some benefit from their German bedfellow—the German republic. My hon. Friend made a valid point in respect of the other EFTA countries, not least Sweden—although, like most other countries, Sweden currently has an economic problem.
It could be that, initially, only two member states will be members of the European central bank. It is likely that, thereafter, for a time there may be five, then there could be seven or 10. We could have a five-speed Europe, a seven-speed Europe or a 10-speed Europe. Therefore, to talk about a two-speed Europe is specious and dishonest.
The United Kingdom cannot be excluded from the single market or any decision about the future of the single market. Whatever happens to Maastricht, our participation in, and membership of, the single market—and that of our partners in Europe and the single market—is a matter of international law. To say that we could be damaged arid that our membership of the Community and our involvement in the single market would be affected is nonsense.
Secondly, after Germany, we are the largest single contributor to the EC budget. I fully support the expansion of the European Community—if it was merely a trading unit and a free trade area, which is what most of our people voted for in the early 1970s. I note that the Opposition's main spokesman in the debate, the hon. Member for Newcastle upon Tyne, East (Mr. Brown), nods in assent. He believes what I believe, that a majority of our people thought that that was what they were voting for in the 1975 referendum. I am surprised that the Opposition are not now in favour of a referendum, because when they were in government they passed legislation for the 1975 referendum. The people of this country know rather more than the Government are


prepared to give them credit for, although at that time they thought that they were joining a trading partnership. However, there was far more to it in the small print of the treaty of Rome.
I have said that we are the second largest contributor to the EC budget. We are also running a massive trade deficit with our EC partners. I have made many speeches all over the country outlining my reasons for opposing the Maastricht treaty and any further step along the path to a federal, centralist state. I repeat what I said in those speeches: that the countries of mainland Europe need us far more than we need them, for the financial reasons that I have spelt out.

Mr. Day: Will my hon. Friend give way?

Mr. Winterton: I am happy to give way once more before I sit down.

Mr. Day: My hon. Friend said why he thinks that the Maastricht treaty is a threat, especially to industry. He also said that he was totally opposed to a centralised, bureaucratic Europe, as are most hon. Members and certainly Conservative Members. Why does he think that Europe has developed in that way? Why is Britain reactive rather than proactive? Could it be because Britain has never been positive about its membership of Europe and gives the impression of having one foot in and one foot out? Some of my hon. Friends give the impression that they do not want to have even one foot in.

The First Deputy Chairman: Order. We are departing from the subject of the debate, which is economic policy.

Mr. Winterton: I hope that you will not blame me, Mr. Lofthouse, for my hon. Friend's intervention. That would be unfair and I have the greatest admiration for you in the Chair. My hon. Friend tempts me to say that I would rather have one foot in the grave than two. Some people, and especially the members of the Government, wish that I had both feet in the grave, but they will have to do better than they have been doing so far to bring that about. You have been extremely patient, Mr. Lofthouse, and tolerant of my brief contribution to the debate on these important amendments.
My right hon. Friend the Prime Minister has said that we will remain at the heart of Europe. Even without Maastricht, Europe wants us and our influence is greatly appreciated. Wherever I have travelled in Europe as a holidaymaker rather than as a Member of Parliament or with Select Committees or other groups, I have found that the people of the country that we are visiting are always immensely impressed by the United Kingdom and its parliamentary system. Does my hon. Friend the Member for Cheadle not believe that this country's culture is slightly different from those of France, Germany, Belgium and Holland?

Mr. Charles Kennedy: Of course it is.

Mr. Winterton: For that reason—

The Chairman: Order. As the hon. Gentleman knows, we have had a debate on culture.

Mr. Winterton: You, Mr. Lofthouse, were of course right to call me to order.
The United Kingdom has a unique, positive and responsible contribution to make to the European Community. We have done so and can continue to do so—and we do not need the Maastricht treaty to enable us to do it.

Dr. Godman: On a point of order, Mr. Lofthouse. I have been sitting in the Chamber since 9.30 pm, and it occurs to me that the central heating has been switched off, because it is very cold. I wonder whether the temperature is below a tolerable level. It has certainly cooled down quite dramatically—which is purely coincidental with the forceful and brilliant speech of the hon. Member for Macclesfield (Mr. Winterton) lasting upwards of an hour.

The First Deputy Chairman: I noticed that some heat had been generated over the past couple of hours, but as to the temperature in the Chamber, those responsible will no doubt have taken note.

Mr. Winnick: It is scandalous that we should be debating these matters at 4.30 am. There was no justification for the Government to proceed after 10 o'clock, and they could not have carried the business motion without the support of the Liberal Democrats. The Jopling report, which will be debated in due course, argues that the House should rarely sit later than 10 pm.
To debate these vital constitutional questions, whether one is for or against them, in the early hours of the morning is quite wrong. It makes a mockery of the Government's commitment to proper and adequate debate. Clearly, they want—so far as they are able—to get most of the economic issues out of the way. I have registered my protest.
The hon. Member for Macclesfield (Mr. Winterton) gave us an overview of the amendments and new clauses under consideration. I say straight away that I am not in favour of the Maastricht treaty. I will remain in order and address immediately article 104c and related matters, but I do not want to give the impression that, if it were not for article 104c, I would favour the treaty. I am against it. I am against the transfer of sovereignty in such a way.
I am not in favour of Britain leaving the European Community, whatever the pros and cons. After 20 years of membership, I think that it has become accepted that there would be many more problems and headaches in leaving the Community than remaining in it. Since the 1975 referendum, I have never argued that we should leave it. There is no question in my mind but that we should remain a member of the Community.

Dr. Godman: Does my hon. Friend agree that, whether one is pro-Community or a critic of it, because there is no promise of a referendum, each and every right hon. and hon. Member owes it to his or her constituents to scrutinise the Bill in as tough-minded and rigorous a way as possible? Surely that is the case.

Mr. Winnick: That is certainly the case. I live in the real world, and I am under no illusion but that the Government will get their way one way or another and that the Bill will be passed in due course. However, the problem will not go away for the Government, or even for my party. Given that there is such a division of opinion and dissatisfaction in the country, the treaty will remain an issue of great controversy. It is sheer nonsense to imagine that it will no


longer remain so once Parliament approves the Bill. The debate will continue. I certainly will not change my mind as a result of the Bill's passage; it would be very odd if I did.
I have said that I would remain opposed to the treaty even without article 104c, but I am even more opposed to the deflationary flavour that characterises so much of it—and, in particular, characterises the article, the clauses and the amendments that we are now discussing. I hope that every hon. Member—not just those who are present now—will read article 104c, if they have not already done so. It uses two and a quarter columns to set out the way in which member states should avoid excessive Government deficits, and goes on to explain the procedures that will be involved when a member state is considered to have exceeded the permitted deficit. We know the related protocol, which clearly states that the deficit should be no more than 3 per cent. of GDP.
Earlier, I asked the Library to check the present position. The Library responded in the efficient and courteous way in which it usually deals with Members' queries. I am informed that a United Kingdom deficit of 8·2 per cent. is forecast for 1993. Achieving the convergence required by the 3 per cent. figure would require a £33 billion cut in public spending, unless taxes were increased.
Unlike some Conservative Members, I have little confidence in the Government's commitment to public spending. Over the years, they have carried out a number of cuts with which Opposition Members have strongly disagreed. But if there was ever an incentive for a Conservative Government with no great love of public expenditure to make further reductions in basic services, surely it is article 104c of the Maastricht treaty. Let me point out to Opposition Front Benchers in particular that, however critical we were of the Government's cuts in public spending, as long as convergence was being secured the Government would have an alibi.
It is not just a question of when the treaty will come into force. The emphasis will be on trying to achieve economic convergence before it comes into force, and before the third stage. That is part of the emphasis in article 104c. It does not merely refer to economic and monetary union as such; measures will need to be taken, and member states will be encouraged to take those measures before the third stage is reached, whether or not the United Kingdom decides to go ahead with EMU in 1996.
I know that those on the Opposition Front Bench will say, "We are not committed to the 3 per cent. figure." That may well be so, and I shall listen carefully to what my hon. Friend the Member for Oxford, East (Mr. Smith) has to say; but the treaty is the treaty, and no remarks from either Front Bench can change its nature. Article 104c directly contradicts all that the labour movement has fought: and campaigned for ever since it came into existence, and I find it inconceivable that we could support a treaty that contains such an article. It is of course true that, if a member state exceeds the 3 per cent. limit, there is no immediate fine or punishment. It is not part of my case that stern disciplinary measures will be taken at once if a member state goes over the limit. I concede that point, but article 104c outlines the steps that will be taken to ensure that a member state is kept in line.
The requirements will mean that a member state must go to the Commission and the Council and explain precisely what is being done to reduce the deficit. That is

a very humiliating experience for an independent country. If we believe that certain measures are necessary in our overall interest, but the Commission decides that they are creating a deficit above the permitted level, we shall have to explain our position. Do those who support the treaty believe that we should have to do that?
When we have a Labour Government, do we want Labour Ministers to go first to the Commission and then to the Council of Ministers to explain, as far as they can, why the deficit has gone above the permitted limit and what action is to be taken? Is that the role of an independent country? Those who argue that the treaty is not as bad as we paint it must explain how and why they support such a measure.

Mr. Betts: I do not understand why such a scenario should concern my hon. Friend. Is he objecting to countries in the European Community trying to work together on economic policy and to one country discussing with others why it is pursuing certain policies, what its objectives are and how they match those of the whole Community? I see nothing wrong with such a process.

Mr. Winnick: I should have been surprised by my hon. Friend's response even if the proposal were not so deflationary. Why should we have to defend and justify our position in the way he outlined? Why should a country which has retained its independence for so many centuries have to virtually grovel and explain why it was necessary to exceed the permitted limit? Have we reached a stage where the practices and policies of the other member states are so superior to ours, and our practices of parliamentary government and democracy so inferior, that we have to do what my hon. Friend suggests?

Mr. Cash: Does the hon. Gentleman agree that, basically, we are being put through this humiliating and absurd procedure because it is within the framework of what is intended to be a united states of Europe? Are not people literally deceiving themselves and the British public continuously, in the belief that we shall somehow gain some advantage from the miserable negotiation that led to the pathetic treaty? The European People's party, to which my party is now apparently married, is the prime advocate of a united states of Europe. That is the truth of what is happening.

Mr. Winnick: I entirely agree, and no one should think otherwise. The other countries involved in the negotiations found it odd that the British dislike the word "federal", so they decided to humour us by leaving it out. Anyone who believes that the process is not leading to a federal Europe lives in a dream world. The hon. Gentleman is absolutely right. I would have more respect for those who are in favour of the treaty if they would say so openly. However much I disagree with the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), he at least knows where he stands. He is for a federal Europe.
The right hon. Gentleman supports the article because he believes that it is a necessary ingredient in securing the sort of federal arrangements that he wants. Indeed, when he was challenged by my hon. Friend the Member for Newham, South (Mr. Spearing) to say whether a single currency would mean a single Government, the right hon. Gentleman nodded. He was perfectly happy with that idea. He would argue that he is a deeply patriotic individual, and I have no reason to say otherwise; we all know about


his military service during the war. He believes that the treaty is the best way in which Britain's role in Europe can be set. But I fundamentally disagree with the right hon. Gentleman. I do not want us to be part and parcel of a federal Europe. The hon. Member for Stafford (Mr. Cash) could not be more right; all the preconditions are there for the road that will ultimately be taken.

Dr. Godman: My hon. Friend said that a country, a member state, could be forced to grovel at a meeting of the Council. May I point out to him that it is not a country but a Government that would be in that position. If a Government are criticised and censured in public during an election year, the Council's intervention could have a decisive effect on the outcome of the election. The Council could play an important role in censuring Governments in public under article 104c(8), especially in an election year. The Council is an extremely exclusive club; is that criticism likely to be administered during an election year?

Mr. Winnick: It is possible to argue that if, during the 18 months leading up to a general election, a Government decided to adopt certain measures that might help them to be re-elected, and that involved more public spending, what my hon. Friend suggests could happen.
However, when I said that a country could be in a humiliating position, with its Ministers having to grovel, I meant, of course, that those Ministers and that Government would represent the people of this country. I do not believe that there is any mandate for us so to abandon our economic sovereignty in the manner outlined in the articles.
I am working on the assumption that Governments would be reluctant to raise taxation anything like enough to cover a deficit such as the present United Kingdom deficit, and that would mean not less unemployment but more. I have great respect for my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). He and I usually agree, but this is one issue on which we disagree. None the less, I know that my hon. Friend is no less committed than I to trying to end, or at least substantially to reduce, the curse of mass unemployment, I shall refer to my hon. Friend's maiden speech now, and I hope I am not embarrasing him by doing so, because this is the second time that I have mentioned that speech; the other was at a party meeting.
In that speech, my hon. Friend said that he was entering the House at the age of 42—an age at which so many of his constituents were not only unemployed, but had probably given up hope of ever being able to work again. My hon. Friend is fortunate, as we all are, to be able to continue in employment. But if we in the Labour party are not concerned about unemployment, what could we possibly be concerned about? I do not question the commitment of our Front-Bench spokesmen to ending or substantially reducing mass unemployment, but how can we argue with any real conviction in favour of measures to try to reduce unemployment and end the curse affecting so many people in Britain and throughout the European Community while at the same time agreeing to measures that would involve a substantial cut in public spending? I do not understand it.
I have already said that Britain is likely to have a deficit of 8·2 per cent. To get anywhere near the 3 per cent. limit, we should need billions and billions of pounds' less of public spending. That is why I believe that we should be very critical indeed.
My right hon. Friend the Member for Chesterfield (Mr. Benn) argued that, if people have no recourse, as they may not if the treaty is ratified, they may riot. I do not know whether they will riot or not; circumstances differ. [HON. MEMBERS: "Nonsense."] What I do know is that, if the House of Commons loses its authority on such fundamental issues, it will be perfectly understandable if people conclude that voting makes very little difference and that the House of Commons makes little difference.
At the moment, when people are dissatisfied, they write to their Member of Parliament. Of course, they work on the assumption that, especially if their Member of Parliament is an Opposition Member, not much will come of it, but at least they know that we will do our utmost and that, ultimately, if the Government who are in office want to act, they can do so: power resides here in the House of Commons. It will not reside here if the treaty comes into force.

Mr. Bill Walker: The hon. Gentleman has been in the House some time. He will have witnessed the feeling among hon. Members on both sides of the House who represent peripheral parts of the United Kingdom, especially Northern Ireland and Scotland, that the House does not fully understand the aspirations of the people in those parts of the United Kingdom. The hon. Gentleman should consider what implications there would be for the unity of the United Kingdom if those people felt that Parliament had no purpose because it had lost all control of finances. Does the hon. Gentleman really believe that that would not lead to some kind of unrest outside?

Mr. Winnick: The hon. Gentleman is right to suggest that people already feel that Whitehall, the Government and the rest are rather remote from their ordinary lives. One of the purposes of writing to a Member of Parliament is that that Member of Parliament then writes to the Minister: there is a reply setting the position out in detail, which one sends on to one's constituents. In other cases, of course, one brings the battle to the House.
I do not want to be provoked, but I am rather concerned because my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle) said a moment ago from a seated position that I was talking nonsense. If I am talking nonsense and my hon. Friend is disagreeing that such powers will be taken away, perhaps my hon. Friend would care to intervene and explain why he thinks I am talking nonsense. Has he read article 104c? Why does he conclude that my thesis—that the House and therefore the country would lose tremendous economic power that would be transferred elsewhere—is wrong?

Mr. Peter Kilfoyle: The utter nonsense to which I was referring was the suggestion that there would be riots in the street over Maastricht. I have no evidence of that, and neither has anyone else in the Committee. That is the utter nonsense to which my hon. Friend refers.

Mr. Winnick: I am glad that I provoked my hon. Friend into intervening. He misunderstood me. [Interruption.] I do not know what sarcastic comment my hon. Friend


wishes to make, but perhaps he will be courteous enough to listen to my reply. I hope that we can conduct this debate in a courteous manner. I have respect for my hon. Friend, as I had respect for his predecessor, with whom I also sometimes disagreed.
It is not part of my argument that people will riot over what we are debating, and if I did not make my position clear, I apologise. I am simply saying—my right hon. Friend the Member for Chesterfield said it with greater emphasis—that, if the treaty comes into force and power is transferred, as it will be, and people find that the House of Commons cannot deal with issues, a certain situation may arise. We must consider what view people will take if there is much concern over mass unemployment and so on. I do not want rioting to occur.
I have always defended some of the scenes that take place in this Chamber. People often ask why there is so much noise at Prime Minister's Question Time and on other big occasions. Far better, I say, that the outlet for the noise should be here than on the streets. When there is controversy—over, say, the poll tax—the divide is great, there will be scenes that some people do not like but which do not bother me. But I assure my hon. Friend that I am not suggesting that people are rioting or even that they are writing letters about what we are debating. I am pleased to have resolved any misunderstanding that may have existed.

Mr. Cash: Is the hon. Gentleman aware that we could be in grave danger of underestimating the consequences of what might happen if this massive arrangement for convergence were brought into effect? Already people in France are rioting over the lamb question, and there is the fishing situation. Difficulties have arisen in Italy and there are problems in Rostock and Frankfurt. The problems in Russia are getting more worrying, and there is Bosnia, Kosovo and so on.
All will be exacerbated by an implosion of the arrangements for economic and monetary union, which will disintegrate just as the exchange rate mechanism has disintegrated. With voluntary euthanasia by national parliaments and, as the hon. Gentleman says, without any means of redress, people will have no base point to which to refer. They will not be able to vote people out, and they will certainly not be able to turn out the bankers.

The First Deputy Chairman: Order. Perhaps we can have more about finance and less about riots.

Mr. Winnick: Rather than pursue a course of action that will not help to resolve the problems of Europe, we should be spending our time, at Community level, dealing with the problems of Europe, inside and outside the European Community.

Mr. Nicholas Winterton: Does the hon. Gentleman agree that, if people lose the ability to influence matters and decisions close to them, affecting their everyday lives, because of the inability of this place, through its economic policies, to respond to people's aspirations and expectations, then in due course, following the build-up of frustration, the sort of situation to which reference has been made—of people going on to the streets—could occur?
While the hon. Gentleman may not be receiving letters about the treaty, I am receiving at least a dozen a day,

99·9 per cent. in favour of the anti-Maastricht stance that I have taken. They come not just from my constituency but from all parts of Britain.

Mr. Winnick: Those are valid points, which go to the core of the article and the protocol which we are debating. What are the roles and functions of the House of Commons? Certainly, it is an outlet for grievances. It is a way in which constituents can express their concerns and we can echo those concerns, as we do daily at every opportunity.
Above all else, the function of the House of Commons is the supply of money. All the battles which took place for the supremacy of the House of Commons against the sovereign and so on were, to a large extent, involved in that issue. If the treaty goes ahead and steps are taken before the third stage—whether we go for economic convergence or not—what will be the function of the House of Commons? However much we may wish to pursue policies—even if the Government of the day take the view that such policies are desirable—if the Government know that they will go over the spending limit and, in so doing, be brought before the Commission and the Council, it is clear that they must take the view that they cannot do what they may wish to do and what they may consider desirable.
Although we are debating the deficit and so on, the core of the matter is the future of the House of Commons and Parliament. I do not wish to say that the House of Commons will have no functions and will virtually close down if the treaty is ratified. To exaggerate the position would be bad enough.
If the powers to decide how the money is spent, what polices are pursued and so on are removed, what are we left with? Effectively, we will be left with the same powers as those of an existing county council. That would be a great disservice not only to ourselves—after all, we are but the servants of our constituents—but to the people of the United Kingdom who, over centuries, struggled to obtain the sort of parliamentary democracy which we have and which I greatly value. I hope that other hon. Members also value it.
As my remarks were not meant to be lengthy, I shall conclude with two points. Unemployment is perhaps one of the most important and crucial issues at present. The hon. Member for East Lindsey (Sir P. Tapsell) referred to the 1944 White Paper on employment. It is interesting to note the last speech of Lord Merlyn-Rees in the House of Commons, which was excellent. It was one of the best speeches he ever made. Anyone who did not listen to it should read it. He specifically referred to the need to go back to the values of the 1944 White Paper on employment and the emphasis which existed just before the war ended, and said that the curse of pre-war unemployment should not return to the United Kingdom, which it has now done.
If one takes the view that we should return to as near full employment as possible, the remarks of Labour Members and the criticisms of some Conservative Members would be of little value if policies along the lines which we are debating were pursued. Such policies would make it virtually impossible to go back to what was intended in 1944 and what was carried out for some 25 or 30 years.
Therefore, it would be wrong to look on article 104c as a technical, academic matter which is not of great importance and which we are using for mischief. The policies that we want to see to end mass unemployment,


provide necessary spending on health and welfare and ensure that the people most in need in our country get their right due are related to this issue.
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The Liberal spokesman, the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy), obviously takes a different view. If he is so critical—as I know he is—of mass unemployment, he should recognise that he is defending a policy which would make it so much more difficult, if not impossible, to end the curse of unemployment in Britain.
I regret that we are debating the Bill at this hour. I have mentioned that before, so I shall not repeat it simply because there has been a change of occupant of the Chair. It is disgraceful that such matters should be debated at 5 o'clock in the morning. I hope that I shall not be seen as unduly critical of other hon. Members on both sides of the House—I am not criticising one side in particular—when I say that it is unfortunate that they have not taken a greater interest in the debate.
I know that Labour Members' commitment to the policies about which I have spoken is no less than mine. They have campaigned in their working and political lives no less than I have done. But in so far as they may be sympathetic to Maastricht and all that goes with it, they should recognise that so much of what they want to see done for the British people, will be undermined if the treaty goes ahead.
The hon. Member for Stafford (Mr. Cash) said in an intervention at the beginning of my speech that the treaty was a substantial step towards a federal Europe. I agreed. It is a step towards a united states of Europe. Those who are in favour of that, including Ministers, have not the honesty openly to declare what they want. In a federal Europe, we would lose even more political and economic independence than we would lose under the Maastricht treaty.
When I look back on my life, I value my working life because I have had the honour and privilege to be a Member of Parliament, however much people disagree with some of my remarks and however much I may cause upset. I hope that it will continue for many years to come. The House of Commons has achieved powers and privileges over the centuries. The House of Commons is the forum of the country. It gives me no pleasure to be in the House of Commons at a time when so much of what we have achieved over the centuries is being undermined by a treaty which I most ardently believe to be against the interests of Britain.

Mr. Dorrell: When he moved his amendment, the right hon. Member for Bethnal Green and Stepney (Mr. Shore) made it clear that this group of amendments dealt with the other side of the coin from the group immediately before. The former group addressed the institutional arrangements that would be necessary for the conduct of monetary policy if there was a single currency in the member states and in Britain.
This group of amendments deals with the arrangements for the conduct of fiscal policy in the context of the introduction of a single currency. As I said in the last debate, it follows as night follows day that, if there is a single currency, it is necessary to have a single monetary

authority. Therefore, it must follow that the authority is divorced at least to some degree from the member states of the Community.
There is unanimity among Members of all parties that, even if there is a single currency managed by a monetary authority and divorced from the member states, the fiscal side of economic policy making should remain the responsibility of member states.
The purpose of the right hon. Gentleman's amendments is to remove from the treaty the qualifications on the responsibility for fiscal policy which rests on the individual member states. Under the terms of the treaty, the main responsibility for fiscal policy, even at stage 3 of monetary union, rests with the member states. It is, however, a responsibility that is qualified both in article 104c and in the protocol that is supported by the article.
The debate on the effect of the article has proceeded on very much the same basis as the debate on the implications of introducing a single currency. It has been based on a similar leap of logic, because it has tended to concentrate on the implications for sovereignty and for the power of the House of the full effect of article 104c as it would apply if a single currency were introduced and we moved to stage 3.
It is therefore necessary to restate the proposition that Britain has given no commitment to move to stage 3 of economic and monetary union as defined in the treaty. We have given no undertaking to introduce a single currency. The House will have to address another time the question whether we would accept the full force of all the paragraphs of article 104c. It is not a question that we have to address later tonight.

Mr. Cash: Will my hon. Friend explain something that so far no Minister has sought to explain or, I believe, can explain? There is another protocol immediately adjacent to the stage 3 protocol—I am glad that the Minister is looking it up as I shall quote parts of it verbatim—that states that we shall not exercise the veto in respect of other member states' movement towards stage 3, that it will be irreversible and irrevocable and that we, as a member state, have agreed to it.
Does my hon. Friend agree that if we have agreed that we will be at the heart of Europe but that we will not prevent other member states from going ahead with stage 3 we are locking ourselves into an arrangement that necessarily presumes that we will go down that route? The decision that the protocol refers to as our so-called opt-out is no more than a fig leaf. It is a clever fig leaf, but it will not kid us.

Mr. Dorrell: I do not accept my hon. Friend's proposition. He seems to be confusing a treaty obligation set out in a protocol not to obstruct the development of monetary union on the part of other member states with a rhetorical flourish used by my right hon. Friend the Prime Minister to describe his frame of mind in approaching European policy. The frame of mind of my right hon. Friend the Prime Minister is of considerable interest and importance to me and, I would hope, to my hon. Friend, but it does not constitute a treaty obligation.
The treaty obligations are set out in the document to which my hon. Friend and I have access, and the protocol on the United Kingdom set out on pages 114–15 of the treaty states clearly:
The United Kingdom shall notify the Council whether it intends to move to the third stage".


It also sets out clearly in the context of that protocol what the implications would be if we decided not to move to stage 3 of monetary union.

Mr. Cash: The Minister must reply to my point about the protocol of transition to the third stage of economic and monetary union. If, as a member state, we are a high contracting party and, together with the other member states, we declare the irreversible character of the Community's movement to the third stage of economic and monetary union stating that it is irreversible and irrevocable, surely my hon. Friend is bound to admit that we as a member state have said that we would go down that route.

Mr. Dorrell: With respect to my hon. Friend, that is a rather different point. He was quoting the phrase that our right hon. Friend the Prime Minister has used about his desire to pursue a policy based on the proposition that we should be at the heart of Europe. That is a rhetorical flourish not found anywhere in the treaty.
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As regards the question of the irreversible character of the Community's movement to the third stage of economic and monetary union by signing the new treaty provisions on economic and monetary union, the treaty provisions in this document set out a total package, and part of the package is the following protocol on the position of the United Kingdom. The protocol makes it abundantly clear, in words that do not, frankly, require a professional lawyer to interpret them, that the United Kingdom has preserved for itself a freedom to join or not to join a single currency, that decision to be made by the United Kingdom in accordance with arrangements that we make for ourselves and which are set out in the Bill which the Committee is considering.

Mr. Malcolm Chisholm: I accept what the Minister is saying about stage 3. Strictly speaking, he is saying what is stated in the words of the treaty, and I accept that because I am interested in looking in detail at the words of the treaty. The question that I want to ask him is about stage 2. Are the Government fully committed to implementing—

The Chairman: Order. The hon. Gentleman is anticipating. He specifically said that he wished to ask a question about stage 2, and the next debate is about stages 2 and 3. I imagined that he would be trying to catch my eye in the next debate. Perhaps he would like to rephrase his question.

Mr. Chisholm: I am talking about budget deficits because in stage 2 there is an undertaking to get budget deficits down, and most of article 104c actually refers to stage 2. Are the Government committed to all the parts of article 104c, apart from paragraphs 1, 9 and 11? A related question would be about the exchange rate fluctuation: are the Government committed to getting back into the ERM at the narrow bands in stage 2? That is what I am interested in.

Mr. Dorrell: The question about exchange rate fluctuations is a question on convergence criteria and the effect of convergence, which really arises in the next group of amendments. As regards the hon. Gentleman's straight question—whether we acknowledge that article 104c, with the exception of paragraphs 1, 9 and 11, applies to us in the

course of the stage 2—the answer is that we do accept it. Article 104c.1 is substituted in stage 2 by the provision in article 109e.4, which is that, during the second stage of the progress to economic and monetary union as defined by the treaty,
Member States shall endeavour to avoid excessive government deficits.
The introduction of the word "endeavour" makes the obligation at stage 2 significantly different from the obligation in stage 3.
I want to describe percisely our obligations in stage 2. There is a lead obligation to endeavour to avoid excessive budgets deficits and during stage 2, as the hon. Gentleman quite rightly pointed out, the teeth, when it comes to making the obligations in article 104c compulsorily applicable, are drawn, because the teeth of article 104c are to be found in paragraphs 9 and 11 of the article. The other paragraphs of the article interpret the meaning of the phrase "excessive government deficits", and the obligation that we accept in stage 2 of the progress to economic and monetary union, as defined by the treaty, is an obligation to endeavour to avoid those deficits.

Mr. Winnick: As the Minister states, the appropriate paragraph reads
Member States shall endeavour to avoid excessive government deficits
in the transitional stage.
Is it the Government's wish, as far as possible, to bring the deficit to 3 per cent. in the period between ratification of the treaty and 1996? If so, what are the implications for public expenditure cuts?

Mr. Dorrell: I shall discuss the impact of the reference values in a moment. Government policy is in line with the treaty obligation which we wish the House to bless and which we wish to sign up to—to endeavour to avoid excessive budget deficits. I will describe how the reference values inform that commitment.

Sir Teddy Taylor: So that we may know exactly what Government policy is, if the Council makes a recommendation under paragraph 7 of article 104c, naming a time limit, would the Government endeavour to seek to achieve that budget deficit within the given time? It is important for people to know the Government's intention. We accept that they are not legally bound by paragraphs 9 and 11, but if the Council recommended that Britain do something specific with the budget deficit within a specified time, would the Government seek to achieve it? It would be helpful if the Minister were to answer that question.

Mr. Dorrell: If the Government found themselves in receipt of an opinion issued under paragraph 7, we would seek to avoid excessive budget deficits, not primarily because of the opinion received under the paragraph but because we think that the policy commitment is sensible in its own terms, for reasons that I shall describe. I will return to that theme because it is relevant to discussion of the treaty of Maastricht and to the great majority of what a Treasury Minister spends his life doing.
I do not accept the argument advanced by the hon. Member for Walsall, North (Mr. Winnick) that a choice must be made between the delivery of social objectives and the avoidance of excessive budget deficits. The two


propositions go hand in hand and, for reasons outwith the treaty of Maastricht, it is Government policy to seek to avoid excessive budget deficits.

Mr. Nicholas Winterton: I am aware that my hon. Friend has certain business experience. He has just mentioned his responsibilities at the Treasury, but may I direct my question to him as a business man? Can he not foresee a number of occasions when a business and perhaps the Government, of which he is a member, might need a budget deficit in excess of the 3 per cent. of gross domestic product specified in the treaty and the Bill; but find that they are restricted? We might rightly need that deficit for a good purpose.

Mr. Dorrell: Yes, I can envisage such circumstances, for example, in 1993–94 when we shall want to be in excess of the reference level values. To suggest that there is some automatic level beyond which we cannot under any circumstances go is a misrepresentation of the treaty, and I will deal with that when I discuss the effect of reference values within it.
In stage 2, we undertake the commitment to endeavour to avoid excessive budget deficits. We are not subject to sanctions in the forms provided for in paragraphs 9 and 11 and, therefore, it is true to say that we have accepted a treaty obligation which, to some extent, diminishes our national responsibility for fiscal policy. None the less, it remains true that responsibility for fiscal policy rests with the member state and, furthermore, in the exercise of that responsibility, the state or the United Kingdom Government and institutions cannot be liable to any sanction arising from the treaty.
If, as a matter of political choice, within the terms of the treaty and of the Bill, the Government, with the consent of the House of Commons by way of an Act of Parliament, as is provided for in the Bill, were to decide to move to the third stage of economic and monetary union, the nature of the obligations taken on with regard to excessive budget deficits would, of course, change. If we go down this road—the issue is obviously one that the House of Commons will consider when deciding whether to do so—our treaty obligation will change. It will cease to be an obligation to endeavour to avoid excessive budget deficits—as a former Whip, I am very familiar with the words "best endeavours"—and will become an obligation, set out in paragraph 1 of article 104c, to avoid excessive deficits. Furthermore, the sanctions provided for in paragraphs 9 and 11 will apply to the United Kingdom.
There is no denying that that is a clear limit, defined by the treaty, on the proposition that fiscal policy will remain the responsibility of member states. In a moment, I will explore the precise nature of that limit, but it clearly is a limit defined in a treaty. I do not, however, accept for one moment the development of that proposition put forward by hon. Members who say that because the national responsibility of member states for fiscal policy is qualified, there is no meaningful responsibility left with the member states. There is a qualification, but it is not true to say that responsibility has shifted. The qualification is defined by treaty, under which responsibility clearly remains with the member states.

Dr. Godman: May we take it that, while some of the United Kingdom's immunity against the imposition of

sanctions by way of paragraph 11 survives, the United Kingdom will not sit in judgment on a state that is being examined because of its failure to adhere to these regulations? Will the United Kingdom take part in the disciplining of another member state when, or if, it loses or gives up its immunity?

Mr. Dorrell: As I said in an earlier intervention, my understanding is that when the Council is reaching decisions about those questions, it meets as the Council of Ministers, and not as any special body, and that all its members, whether or not they are in stage 3, are entitled to participate within the terms of the article. I am sure that if that information is incorrect I shall be appropriately advised so that I may inform the Committee.

Mr. Nicholas Winterton: Is not my hon. Friend accepting that if and when we go to stage 3 the Government of the United Kingdom will be put into a straitjacket—and I mean a straitjacket—as the only possible action, if we perceive a budget deficit beyond the 3 per cent., will be to raise taxation? In fact, the Government will not be able, in stage 3, to do what the Chancellor has done this year. Is this the sort of decision that my hon. Friend believes is right for the country?

Mr. Dorrell: I am about to explore the precise nature of the obligations that we would be assuming. It is the Government's objective to avoid excessive Government deficits—I hope that I share that commitment with my hon. Friend the Member for Macclesfield (Mr. Winterton).
When he introduced the debate, the right hon. Member for Bethnal Green and Stepney correctly drew attention to the fact that the provisions of article 104c do not provide for automatic application of limits, either to budget deficits or to the relationship between gross Government debt and GDP. The reference values set out in the treaty are not commitments. The treaty's commitment is to avoid an excessive budget deficit.
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Article 104c.3 clearly sets out the consequence of a failure to fulfil a reference value. It is not to declare that an individual member state is in default of its treaty obligations. The result of an individual member state's failure to satisfy the reference values is set out in paragraph 3, where it states:
If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report.
That is the beginning and the end of the precise consequences of failure to satisfy a reference value. The paragraph goes on to discuss the issues that the report prepared by the Commission has to cover if a report is occasioned by the failure of a member state to satisfy the reference criteria.

Ms Abbott: Much has been made of the specific concrete sanctions in article 104c, but long before fines and votes were encountered, would not the very fact that a negative report had been prepared and possibly published lead to the country involved starting to lose access to the capital markets and capital flows? Rather than focusing on the end of the road, would it not be better to focus on the beginning of the road, where a country that was not hitting its deficit targets would be in a position similar to those countries that receive a bad report from the International


Monetary Fund? The IMF does not have to impose concrete sanctions; the minute the international capital markets are aware that a country is failing its IMF tests, capital flows, whether from multinational institutions or commercial banks, cease to enter that country. We can harp on about the sanctions to the exclusion of looking at what would happen naturally in the market if a country were perceived to be failing its tests, whether at the second or third stage.

The Chairman: That was a very long intervention.

Mr. Dorrell: The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) makes a good point. The truth is that, whatever the treaty of Maastricht says, the financial markets watch the performance, not merely of member states of the Community, but every member of the United Nations. The criteria set out in the treaty are well known to any operator in the sovereign lending market.
The mistake of so much comment on the treaty obligation is to assume that, merely because the Commission is under an obligation to prepare a report, the Commission will necessarily come to the conclusion that failure to deliver one reference value constitutes an excessive budget deficit. There is no basis for that assumption.
Article 104c.3 makes it clear that, in preparing the report, the Commission has to look at the values that are measured in order to assess reference values—deficits and gross Government debt. But paragraph 3 also states that the Commission must have regard to the relationship between the deficit and Government investment, and it must also have regard—this is the key answer to my hon. Friend the Member for Macclesfield and to one of the issues raised by the right hon. Member for Bethnal Green and Stepney—to
the medium term economic and budgetary position of the Member State.
The hon. Member for Sheffield, Attercliffe (Mr. Betts) got that exactly right. That provision not merely allows but requires the Commission to take account of the trade cycle in assessing whether a member state is running an excessive budget deficit.
The treaty recognises that budget deficits will fluctuate according to the state of the trade cycle. The key criterion is none of this mechanistic stuff but the words "an excessive budget deficit". In assessing that, the Commission and, on the basis of its report, the Council must look at the economic position in which a country finds itself. These are guides and there is nothing automatic about the conclusions to which they lead.

Mr. Chisholm: This matter is at the heart of the debate on budget deficits and it is important to examine article 104c 3. The last two lines of that are central to the reinterpretation of this part of the treaty. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) dealt with Government investment and said that, as it was only 2 per cent. of GDP, it was not very relevant to the argument. The key words in the article are
the medium term economic and budgetary position".
The Minister and my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) are interpreting those words in a Keynesian way as if they refer to cycles and mean that sometimes we can have budget deficits and sometimes we cannot. But the thrust of the treaty is

anti-Keynesian and does not mean that. It merely says that a year or two will be given to get the budget deficit down to 3 per cent. and then it must be kept there. It is not about Keynesian reflation and troughs and peaks and so on.

Mr. Dorrell: I will later discuss the supposed divide between Keynesians and monetarists. I sometimes wonder which side of that argument Keynes would have been on if he were alive.
I should like to deal with another question posed by the right hon. Member for Bethnal Green and Stepney. He asked whether the decisions of the Council, which are provided for in paragraphs 9 and 11 of article 104c are appealable to any Community institution. They are appealable in the normal way under article 173 of the treaty of Rome, which states:
The Court of Justice shall review the legality of acts of the Council and the Commission other than recommendations or opinions.
The provisions of paragraphs 9 and 11 are neither opinions nor recommendations and are therefore subject to review on the initiative of the affected member stale.
Any hon. Member is legitimately entitled to ask why the provisions for confining the fiscal responsibility of a member state are in the treaty. I hope to give a clear answer to that question. Once again, I must ask the Committee to recognise that the provisions, when they have teeth, apply only in the context of a single-currency system. Those who will not accept under any circumstances a single currency clearly do not have a basis for engaging in the argument, because to be against a single currency means that one is against all the paraphernalia that goes with it. The provisions are part of that paraphernalia.
In the context of a single currency in the member states, every member state has a clear interest in avoiding excessive official borrowing because that would influence financial conditions in every member state. If some member states engage in such borrowing, it would lead to a distortion of capital markets and it is not difficult to see circumstances in which that distortion might lead to market turbulence which would damage the interests of every member state.
It would in a sense introduce into the single currency area decision-making process precisely the market pressures to which the hon. Member for Hackney, North and Stoke Newington referred. We do not want the position where market operators can conclude that sovereign borrowers within a single currency area have collectively become a bad risk. If we enter that world, the countries within a single currency region would collectively run a serious risk of damaging their interests as a result of market turbulence.

Mr. Bill Walker: I admire the intellectual way in which my hon. Friend is answering the debate. Is he saying that, if we accept a single currency and we cannot borrow and cannot print money, we will still have financial control?

Mr. Dorrell: If we chose—and I emphasise that point—to go for a single currency, we would have satisfied ourselves that the arrangements for managing it were adequate. We would also accept the obligation placed on ourselves—as on every other country within the single currency area—to limit official borrowing to avoid the market turbulence and damage to our collective interests that would flow if that restraint did not exist.

Mr. Shore: Is it the Minister's view that, when stage 3 is reached, it would be more damaging to Britain—if it had an excess deficit like that of the coming year—to upset the smooth running of the system, or would it be in our interests simply to accept the reasons for our excess deficit, and that it would be far too harmful to reduce it, even if that had the effect of ruffling the surface of the single currency?

Mr. Derrell: Earlier, there was some discussion of confidence in our own abilities. If we reached the conclusion—and the Government have done so—that in the circumstances of 1993–94 an 8 per cent. budget deficit was not excessive, we would have done so on our own authority. In the belief that that stood up as a rational analysis, we would be able to persuade the Commission and the Council of the truth of that. That is the importance of recognising that reference values are not absolute limits. The only result that will flow from breaking a reference value will be an obligation on the Commission to produce a report.
As to whether there is a deflationary bias, the hon. Member for Walsall, North said that the system is contrary to everything for which Labour has always campaigned. The Committee must ask what is contrary to everything for which Labour has campaigned. It is not a 3 per cent. deficit or a 6 per cent. debt to GDP—it is excessive budget deficits. Although I might want, on a partisan platform, to represent Labour as pursuing a voluntary policy of pursuing excessive deficits, I cannot believe that Labour Members want, out of their own mouths, that policy ascribed to them as being the ambition of 100 years of political activity.

Mr. Winnick: I certainly did not want to give the impression that the labour movement, or the Labour party, was started with the aim of achieving as high a deficit as possible; that has never been our position. My argument is that at times—such as the present time—a deficit far higher than 3 per cent. may well be necessary if we are to reduce mass unemployment substantially, and to implement health and welfare policies. We should not have to apologise for such a deficit; certainly, we should not have to grovel to a foreign body. I was complaining about that, rather than suggesting that a high deficit was necessary or desirable at all times.

Mr. Dorrell: Clearly we could continue to argue about the issue for some time; and no doubt we shall do so, in the context of the Finance Bill.

Mr. Legg: Will my hon. Friend give way?

Mr. Dorrell: No. I want to end my speech.
I am not in favour of excessive budget deficits. I favour restraint for its own sake, because I believe that it is the best way of delivering growth and improving living standards. I also recognise that, if this country opted for a single currency at some future date, a necessary part of the collective obligation of operating such a currency would be not to allow excessive official borrowing by any of the participants. For both those reasons, I do not support the amendments.

Dr. Godman: On a point of order, Mr. Morris. I do not wish to detain the Committee, but before he sat down the

Minister promised that he would answer a question that I had asked him. He has not honoured that promise. I should be content if he said that he would write to me.

Mr. Dorrell: Further to that point of order, Mr. Morris. I should be grateful if I could write to the hon. Gentleman.

The Chairman: I am delighted that bonhomie has prevailed at this early hour.

Mr. Andrew Smith: I must take up the Financial Secretary's remark about being tempted to misrepresent Labour's position on deficits. I hope that, now that he has made that confession, he will take the earliest opportunity to correct a gross misrepresentation of our position that was repeated not just immediately before and during the general election, but in the Budget debate over the past few days. It was suggested that we were committed to £35 billion of extra expenditure.
I strongly agree with hon. Members on both sides of the House that it is appalling that we should debate such important matters in the middle of the night. Whatever view hon. Members may take of the treaty, the Bill or deficits, the House cannot do proper justice to such issues after more than 12 hours of debate. We know that the Liberal Democrats, as well as the Government, are responsible for this; the public will draw their own conclusions.

Mr. Michael Spicer: Far be it from me to defend the Liberal Democrats, but in casting aspersions on them the hon. Gentleman must accept that his own party polled considerably under strength in the vote concerned.

Mr. Smith: That certainly is not true. [Interrupton.] I understand that the majority was 17, and that 17 Liberals voted with the Government.
I do not think that the Minister has really addressed the points that have been raised, especially those raised by Labour Members. He seemed to be trying to convince the House that the Bill and the treaty did not need to be reinterpreted to operate satisfactorily: I wish to make the opposite case.
We have never claimed—and I would not do so now—that the treaty or the Bill was perfect. We had to judge the package as a whole, as did the Labour party conference which decided:
Conference believes that the Maastricht Treaty, while not perfect, is the best agreement that can currently be achieved.

Mr. Spearing: I have made the point several times but not, I think, in public, that the very judgment to which my hon. Friend refers surely depends on our three important financial debates. Many of us will have concluded that although, as the Labour party judged, the Maastricht treaty offers the best terms available, they are not good enough. My hon. Friend and his immediate colleagues have not paid sufficient attention to that issue; if they did, they would realise that the terms are not good enough and that we should not support the treaty.

Mr. Smith: I will endeavour to convince my hon. Friend otherwise, although in view of what I know about his long-held position and the arguments that he advances in support of it, which I genuinely respect, I am not overly optimistic about my ability to do so.
Several important issues arise from the question of the deficit, as mentioned by my right hon. Friend the member for Bethnal Green and Stepney (Mr. Shore) and my hon.


Friend the Member for Walsall, North (Mr. Winnick). We must make it clear that the criteria set out in the treaty are not blanket requirements but triggers, aspects of economic performance to be evaulated in determining how far the economies of the various member states have converged prior to the establishment of economic and monetary union and, in part, as one set of considerations to evaluate comparative economic performance after such a union. They are not cast in stone, and we have made it clear several times that it is not acceptable for them to be interpreted in a mechanistic or inflexible way.
As has been said, the articles applying the criteria explicity require them to take account of wider economic considerations. For example, the article on Government deficits requires the Commission to take account of the extent of Government investment expenditure. My right hon. Friend the Member for Bethnal Green and Stepney referred to that point. He began by saying that because investment expenditures were, I think, about 2 per cent. of gross domestic product, they were not too significant. However, in relation to a target within the treaty of 3 per cent. for the overall deficit, the extent of that 2 per cent. room for manoeuvre and whether or not one has it—I argue that we should—makes a considerable difference.

Mr. Shore: Perhaps the Minister could advise us on this matter. Are we talking about a 3 per cent. guideline plus the public investment programme? I believe that that is highly unlikely.

Mr. Smith: The treaty establishes a 3 per cent. guideline, but says that account must be taken of Government investment expenditure as well as the medium-term budgetary position, with which I shall deal in a moment. I suggest that there is an ambiguity, which should be exploited in the interests of flexibility.

Mr. Nicholas Winterton: The hon. Gentleman is replying to the debate rationally and reasonably. If I put a hypothetical case to him, will he consider it? If we had proceeded to stage 3—

The Chairman: Order. Interventions have been getting longer since I have been in the Chair. Interventions are traditionally very short, and I hope that this one will be short.

Mr. Winterton: I am sorry, Mr. Morris, but I had hardly got to my feet.

The Chairman: There would be little point in my intervening after the hon. Gentleman had spoken at excessive length, so I invite him to make a short intervention.

Mr. Winterton: Of course, Mr. Morris. I greatly admire your dexterity in such matters.
Bearing in mind the restrictions that are apparently laid down in the legislation, will the hon. Member for Oxford, East (Mr. Smith) tell me what action he believes that the Government would be able to take if we were at stage 3 and had a budget deficit of £50 billion, and the Commission hauled us over the coals and found our explanation unacceptable?

Mr. Andrew Smith: If a Labour Government were in office we would have implemented our proposals for growth and expanding employment, so the GDP would be

high enough to bear the level of borrowing within the criteria, interpreted with flexibility appropriate to the circumstances on which we would also have insisted.
I was saying that the criteria require the wider issues to be taken into account, including the medium-term economic and budgetary position of the member state.

Ms Abbott: We are now back to the familiar line of argument from Labour Front-Bench spokesmen—that the text of the treaty does not mean what it appears to mean. If the criteria are as flexible as my hon. Friend with the collusion of Ministers, argues, when the German Bundestag ratified Maastricht last year why did it pass a specific resolution on EMU saying:
The stability criteria for the move to stage 3 of EMU will be narrowly and strictly defined…the German Bundestag will oppose any attempt to evade the stability criteria that were agreed in Maastricht"?
Is my hon. Friend not whistling in the wind? Does not the flexibility exist only in the imagination of Front-Bench spokesmen?

The Chairman: Order. One question is enough.

Mr. Smith: I would always be happy to take more than one question from my hon. Friend.

Dr. Godman: On a point of order, Mr. Morris. I seek your advice. Is it not the practice that interventions in Committee must be both brief and concise? I seek your advice, because I was of the opinion—

The Chairman: Order. The answer to the hon. Gentleman's question is yes.

Mr. Smith: My hon. Friend the Member for Hackney, North and Stoke Newington (Mr. Abbott) referred to the words of the treaty and suggested that I was trying to deviate from the text. The relevant part of the text says:
The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure, and take into account all other relevant factors, including the medium term economic and budgetary position of the Member State.
I am talking about the way in which we should argue with our colleagues in Europe that those words should interpreted.
My hon. Friend is right to say that there are people in Europe, including some people in the German Parliament, who may wish to take a different view. I suggest that we should ally ourselves with those who are pressing for a flexible interpretation, as opposed to some of the: arguments that I have heard in the debate, which would cement us into acceptance of a narrow definition which would not be in the interests of the Labour movement, or of this country.
To return to the thread of my argument, the third key point about the criteria is one about which we have not heard much in the debate so far. It is that the protocol on convergence criteria specifically requires the Council of Ministers to adopt appropriate provisions to lay down the details of the criteria, which will then replace those set out in the protocol. So the opportunity is there for member states to make it clear, as we urge the British Government to do, that the criteria should not be defined or deployed to implement monetarist policies or to inhibit economic recovery in the member states.
We have long advocated the course that the Government should advocate—the course that they should have advocated when they held the Community


presidency: that convergence should include the measures for employment, industry, investment and the environment which are essential for economic recovery in this country and in the rest of Europe. There is a powerful injunction on them to do that in article 102a, which states:
Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community, as defined in Article 2".

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Mr. Spearing: Does my hon. Friend agree that the proof of the pudding is in the eating? Earlier, I asked a question about the current request to nations to report on their convergence programme. I believe that such a request has come to Her Majesty's Government. I understand that, in that request—even before the treaty—the wide interpretation that my hon. Friend advocates has not been placed on the provisions. Should not we ascertain from the Government the request that they have received and the reply that they have given, so that we can test the proposition that my hon. Friend puts to the Committee?

Mr. Smith: My hon. Friend is right that the treaty contains a provision for a report on convergence to be submitted. It would clearly be inappropriate for the Government to submit such a report before the Bill giving effect to the treaty had been approved by the House. I am sure that if the Government have submitted one, or are working on it, the Minister will intervene to tell us the exact position. If the Bill and the treaty are implemented, such a report will presumably be submitted.
I was referring to the need for more flexible interpretation of the criteria in the interests of economic recovery not merely in this country but throughout Europe. Reference was made earlier to the comments of my right hon. and learned Friend the Leader of the Opposition. I will quote from my right hon. and learned Friend's speech in Paris on 15 January. It is important to make the Labour party's position on these issues clear, and there is no better way of doing that. My right hon. and learned Friend said in that speech:
It would also, I believe, be misguided for the European Community as a whole to make the same mistake of seeking arbitrarily to curb public deficits at a time when the European economy is poised on the verge of recession. There is clearly a danger that this may occur if the fiscal deficit rules of the Maastricht Treaty are rigidly interpreted. An excessively strict application of the protocol which specifies a target of 3 per cent. for government deficits would compound the existing financial squeeze which has been caused by high interest rates in Germany.
If all member states of the EC tried to satisfy the 3 per cent. target by the end of 1996, for example…the combined effect on total EC output would be a reduction of over 2 per cent. This is obviously absurd and simply not feasible for a majority of member states of the Community. I would argue very strongly that the 3 per cent. rule must exclude all deficit-funded capital investment and take full account of the state of the economic cycle in each member state and in particular trends in unemployment.
The Community will need to clarify these points if it is to avoid adding a fiscal choke to the monetary grip that has already sharply reduced growth in the European economy.
I put it to the Committee that there could be no clearer, firmer or more persuasive statement of the Labour party's position. We are opposed to a deflationary impact of the criteria and to an inflexible or mechanistic interpretation of them.

Mr. Hain: I warmly welcome my hon. Friend's reference to the Labour party's official policy as expounded by its leader. Is there not a difficulty in interpreting the flexibility of the convergence criteria, however? All the countries are locked together seeking to achieve the criteria required by the treaty. No country wants to achieve what is required and then find that another country is being let off the hook. The countries are forced, in a sense, to follow each other in achieving the aim. If they do not, there is no level playing field. The difficulty with establishing the criteria in the way in which the treaty establishes them is that the countries are placing pressure on each other to achieve them, and that, if some do not, others will start to complain. That is why it is difficult to interpret the criteria flexibly.

Mr. Smith: I agree with my hon. Friend. He is saying that it is important to have co-ordination for flexibility and recovery and not for inflexibility and deflation. Not just the Labour party in this country is saying that. There has been increasing support in the Commission for the view that I am putting forward. There has also been support in the European Parliament and in other members states. I will give examples. On 17 February, the Commissioner for Economic Affairs, Henning Christophersen, said in Brussels that the interpretation of the criteria involved
political judgment, and a deficit of more than 3 per cent. would not necessarily infringe the criteria if this was caused by action to tackle a cyclical recession.
On 23 February, the Finance Minister of Belgium was reported to have said:
It is not to be ruled out that the member states will revise one of the four criteria foreseen by the Maastricht Treaty for entry to the final phase of economic and monetary union, the one relative to the maximum threshold of the budget deficit set at 3 per cent. of the national product.
He was reported as saying that if the rate of growth of the economy remained next year as low as that for the present year, the threshold could be increased to allow EC states to support economic activity.
On 9 March, in relation to the European Parliament debate on unemployment and the annual economic report, Mr Christophersen said it had been established
that the criteria should not be used in a mechanical way.
On 12 March this year the European Parliament adopted a resolution on the annual economic report calling on the Commission and the Council
to make it clear that the excessive deficit criterion defined in the Maastricht Treaty must be applied over the economic cycle and that increases in budget deficits resulting from economic recession should not in themselves lead to tax increases or public spending cuts which could damage long-term development and drive the European or national economy further into recession.
I give those examples—there are others—to show how opinion in the rest of Europe, reacting to the scale of the recession, on the verge of which Europe as a whole is poised, is saying that it must be interpreted flexibly and that we need growth and not deflation.

Dr. Godman: Does my hon. Friend agree that effective implementation of article 104c depends heavily on article 109c? What is his view of the structure of the monetary committee? Is it a European Community-wide select committee, or some kind of police force which can decide to investigate the economic management of member states?

Mr. Smith: It will not be an effective police force, as it has only advisory powers, although I agree that they will


be strengthened when the financial committee comes into effect, if progress is made towards economic and monetary union. But I agree with my hon. Friend that much turns on the interpretation placed on article 104c, and I have been developing that argument. I suggest that in common with the growing volume of voices in Europe calling for the flexible interpretation of the provisions, we should conclude that instead of imagining that the convergency criteria are fixed and cannot be changed, we should be arguing that they are capable of a more flexible interpretation. We must continue to stress that it is vital for economic recovery in Europe that that flexibility is secured.

Mr. Leighton: Nobody seems to be bound by those words. The Leader of the Opposition said in his speech in Paris that it could lead to a cut in overall output of more than 2·5 per cent.—in other words, it could lead to another recession—and he added that the position must be clarified. The position has not been clarified. Therefore, we should vote against the provision. My hon. Friend seems to be saying that 3 per cent. does not mean 3 per cent.—that it might mean 5 or 6 per cent. We now have 8·5 per cent. He also says that it is meaningless. It is not meaningless. He knows that we attended a meeting with a representative of Jacques Delors who said that the criteria mean something. They are provided by the Germans, who are not prepared to have their mark made into a Mickey Mouse currency. They want real guarantees for their currency.

Mr. Smith: I was not suggesting that the criteria did not mean anything. Clearly, they mean something.
No one is suggesting that any level of public deficit can be sustained indefinitely. The important question is the relation of the level of public deficit to the position in the economic cycle, how that pans out over the whole of the cycle and how it stands in relation to investment expenditure. Those matters will be clarified at the end of the day through the various Community institutions. The European Parliament will have an influence and, obviously, the Commission will have a voice. Ultimately, the determining factor will be the statements issued by the European Council.
In conjunction with our colleagues in the rest of Europe, we must take every opportunity to argue for a rational interpretation of the criteria which make some growth possible.

Mr. Cash: I can understand the hon. Gentleman's attempt to put some latter-day rationale into his argument. Does he accept that the whole object of the arrangement was to be modelled on the Bundesbank, which had a rigid, determined approach that all of this would somehow achieve price stability? The whole argument has been blown open, as happened with the exchange rate mechanism. People must acknowledge that the arrangement will not work but that somehow we must continue marching with this. Therefore, one comes up with another adaptation to it; we will be flexible. If there is such a tremendous desire to get this through, does the hon. Member for Oxford, East (Mr. Smith) recognise that we have reached the point at which we recognise that the arrangement will not work at all and that we should pack up our bags and take the whole thing back to where it came from?

Mr. Smith: No. The record of past years shows that we are in a weak position, especially when the hon. Gentleman is so contemptuous of what the Bundesbank has achieved. We do not want to emulate it in every respect, but the achievements in Germany in terms of low inflation, generally high employment, growth and living standards deserve to be examined constructively.

Mr. Denzil Davies: My hon. Friend is arguing for a flexible approach to the criteria. As Labour Members are in favour of a single currency because they believe that it is a good thing, is my hon. Friend becoming worried about such flexibility? Would it be better to be inflexible, get the pain over quickly and reach the ideal on a single currency as quickly as possible?

Mr. Smith: Inflexibility in these matters threatens to plunge us into a deep recession which I do not want to see.
How one judges the 3 per cent. depends on the period it covers. There were some references to this earlier. It is important to stress that the treaty commitment and the definitions in the treaty do not refer to the public sector borrowing requirement; they refer to the Government's lending position on the ESA definition. The ESA definition is not the same as the public sector borrowing requirement.
If one takes the record of general net lending borrowing by the Conservative Government from 1979–1991 and applies a 3 per cent. criteria, saying that the Government should have spent 3 per cent. of the gross domestic product, we would have not less but more public expenditure, to the tune of £39 billion over that period. I do not make that point to suggest that the criterion is always easy to live with, even across the medium or longer term, but to illustrate that it depends what period one takes the criterion to apply to.

Mr. Chisholm: With reference to the 1980s, surely the surplus was a result of privatisation and North sea oil. Those were unusual circumstances. The effect across Europe of the 3 per cent. criterion would be massive public expenditure cuts. Are not the two main thrusts of this monetarist treaty zero inflation and the cutting of public expenditure to make Europe have the same level of public expenditure and social provision as the rival economic powers of Japan and America?

Mr. Smith: The figures that I quoted excluded privatisation receipts because the definition excludes them. I merely used them to illustrate that it depends on the period across which one takes the 3 per cent. to apply.
I argue that we should have deficit finance public expenditure, especially for investment and counter-cyclical purposes. As hon. Members have said, article 104c specifically excludes circumstances in which the excess over the reference value is exceptional and temporary. There is an argument, and we certainly must make it, that action taken to counter a recession is, of its nature, temporary, precisely because of the nature of the cyclical process.

Dr. Godman: Does my hon. Friend agree that article 104c is riddled with ambiguities? For instance, it would appear that the United Kingdom has been granted immunity from the imposition of sanctions. Yet at this


moment, we do not know whether the United Kingdom Government would be able to sit in judgment on others who are deemed to have broken the rules.

Mr. Smith: My hon. Friend has made several telling contributions to the debate and uncovered areas of legal and procedural uncertainty on precisely such matters. I shall be interested to receive a copy of whatever written reply the Government send him. [Interruption.] The Minister has received a note from the Box and is in a position to give us the information now.

Mr. Dorrell: I am advised that in stage 3, the United Kingdom would take part in the assessment under article 104c, but not in the vote on sanctions if it was not a full participant in stage 3.

Mr. Smith: Thank you. I shall draw my remarks to a conclusion now, but I could not do so without referring to the amendments within the group which we on the Opposition Front Bench intend to press to a vote. In this and the preceding debate, we have emphasised how important article 2 is. We have stressed our commitment to work for its full application. I draw the attention of the Committee to new clause 57, which is extremely important in that respect and attempts to address some of the anxieties that my right hon. and hon. Friends have expressed.
New clause 57 seeks to incorporate in the Bill a requirement that—before submitting information to the Commission, either under the provisions of multilateral surveillance as in article 103(3) or under the excessive deficit requirements of article 104c, which we have spent so much time discussing, the House shall consider
an assessment of the medium term economic and budgetary position in relation to the social, economic and environmental goals set out in Title II, Article 2".
It further requires that this assessment
shall form the basis of any submission to the Commission under
these articles. There could be no clearer indication of our intention to link the implementation of the treaty and closer European co-operation to the goals of article 2.
As I have said, it is our intention to press new clause 57 to a vote. It is buttressed by our proposed new clause 2 which would set multilateral surveillance firmly in the context of economic growth, industrial investment, employment and the balance of trade and compare Britain's performance with that of other member states. We also wish to press that new clause to a vote. Amendment No. 19 and others of a similar nature which were tabled as probing amendments will not be pressed to a vote.
I urge the House to make it clear that we do not want the convergence criteria to be applied in a mechanistic or inflexible way, and to signal that we want to insist on their being interpreted to foster and not to frustrate concerted action for sustainable economic growth and jobs. The best way to do that is to vote for the two amendments.

Mr. Charles Kennedy: I shall be brief. I agreed entirely with the hon. Member for Oxford, East (Mr. Smith) until his final exhortations about the two new clauses, neither of which commends itself to the Committee. They are both innocuous to the extent that one wonders whether they are a small part of an ulterior

exercise. If one examines existing budgetary practice and what is likely to happen in the European Commission, it follows from what has already been agreed that both are likely to be put into practice. Apart from that, there was great good sense in what the hon. Gentleman had to say.
I wish to take a more federal viewpoint than has been heard so far in the debate, touching on what the right hon. Member for Bethnal Green and Stepney (Mr. Shore) said in moving the amendment. What he found so obnoxious in the provisions attached to this part of the Maastricht treaty was, to use the right hon. Gentleman's words, an alien body being able to impose itself on Britain or any other member state. Later in the same speech, he said that he understood and respected those who took a federal viewpoint, though he did not agree with it. That is where the right hon. Gentleman and I part company. We see Europe not as an alien body but as an entity within which we are increasingly integrated, and we want to continue down that track.
Some of the genuine difficulties that have arisen in the progress towards stages 2 and 3—economic and monetary union, a single currency and the deficits—reflect, first, the fact that the political and economic context has changed since the original Delors report and, secondly, that the world and the European Community have moved on politically since the negotiation and agreement of the Maastricht treaty.
Those who are worried about the apparent or perceived inflexibility of some of the articles would be well advised to remember that, ultimately, the European Commission and any other bodies that may flow from this part of the treaty have to be responsive to the real politics with which they are dealing.
The Government have been pointing to several decisions that have been taken in the European courts and elsewhere, which they say are representative of the new mood of subsidiarity across the Community. I have always found a mood of subsidiarity rather difficult and tricky to capture. However, the Government have a fair point in emphasising the fact that, as it is a political organisation, the institutions of the European Community, including the Commission and the central bank, must be seen to be responsive to the unit parts—the individual member states.
That is why, in political terms as well as for reasons of political muscle referred to earlier, there is cause for optimism that the kind of interpretations that some of us have been pointing to during the debate will hold sway. We all have our party axes to grind—or perhaps, our particular viewpoints to exert—in the course of this debate. It is worth looking at what we would all agree is an objective source, the Library of the House. It looked back to the original Delors proposals.

Mr. Spearing: We are not there now.

Mr. Kennedy: No, we have moved on since then.

Mr. Spearing: Yes.

Mr. Kennedy: The hon. Gentleman is quite right. The point is that, since the original Delors proposals, we have moved on, and the position is even better now than it was then, for reasons which I will outline. The original criteria were too inflexible, because they concentrated too heavily on one year's budget outturn. The briefing note from the Library goes on to say:


Furthermore, in the light of the pressure exerted upon government borrowing because of the slow down in growth of a number—
not just ourselves, but a number—
of Member States, Commission officials have begun to place more emphasis upon the direction that debt and borrowing levels are moving rather than their absolute levels.
That is an important point to enter into the record—that this is not just some kind of freeze-frame that we are looking at: it is a continuous reel, and it is therefore one which, by definition, will be more flexible than some of the most dire warnings that we have heard expressed in the course of the debate would suggest.

Mr. Spearing: I am grateful to the hon. Gentleman, because it was my sotto voce intervention to which he kindly responded. Has not the argument throughout the evening showed that while, as he says, Commission officials may have moved in that direction, things could move in the other direction, just as the climate of the European Court of Justice has moved? What the hon. Gentleman is saying confirms our fears that this arbitrary and official rigidity could move back, even on his interpretation, and still be within the terms of the treaty.

Mr. Kennedy: As is the case in so many of the debates throughout the process of this piece of legislation, from my own political standpoint, I feel that the hon. Gentleman's point could be best addressed by our being more integrated rather than less, as he would wish to argue. The whole logic of the European case is that, if we want to influence in a favourable way the outcomes and decisions taken at European level—

Mr. Spearing: By officials.

Mr. Kennedy: By officials at the moment, because all the institutions, again from a federal point of view, are not democratic enough. We are going a bit wider there, Mr. Morris, than perhaps we are allowed to in this set of arguments. My whole case would be—I will come to this in the specific context of the parts that we have been debating through the night—that, as a general rule, we are more likely to exert more influence by being more integrated, not by being more stand-offish or semidetached or whatever phrase might be appropriate to characterise the hon. Gentleman's position.

Dr. Godman: The hon. Gentleman will know that I am not altogether hostile to federalism, but I should like to ask him how the cause of federalism in the European Community is advanced by the implementation of articles 103.3, 104c and 109c. To my mind, the implementation of those articles strengthens the central institutions which have at the moment enormous power, although far from federalist in structure.

Mr. Kennedy: The economists who informed and advised during the Maastricht neogitations were operating against two different backgrounds. One was a set of economic theories that said that countries will try to free-ride over any economic difficulties involving their currencies, that it would be a free-for-all which would bleed the centre, and that no centralised institution can withstand that. The other argument was that one would have to have excessive centralism and downward pressure on all member states.
I appreciate that the hon. Member for Greenock and Port Glasgow (Dr. Godman) feels that there is too much downward pressure, but the achievements of the Maastricht process, if not the happiest of halfway houses, were more of a compromise than would have been the case if one considers the original Delors package, which preceded Maastricht.
Consider our currency union within the United Kingdom. The hon. Member for Tayside, North (Mr. Walker) and I have argued about the applicability of comparing our Union with that envisaged in the Maastricht treaty. Our currency union, for which the Government, the Treasury and the Bank of England are responsible, involves tight, centralised controls, not least over local spending and borrowing. I find it inconsistent that some hon. Members will happily vote for rate capping and all sorts of other controls of local government because of the single currency demands of our currency, yet the milder proposals for union in the treaty cause them such massive offence.

Mr. Bill Walker: The hon. Gentleman is as knowledgeable as I on the objectives of the Act of Union 1707, and the treaty signed at the time. He will know that the economic, monetary and political objectives of that Union were almost identical to the objectives proposed and written into the treaty. The clauses are different, but the objectives are clearly stated and almost identical. I therefore view the treaty as a centralising process—not federal at this stage—which will create much the same circumstances as in our Union with a single currency, a single Chancellor of the Exchequer and single borrowing requirement, all controlled from the centre. The Scots have complained about that for years. I am happy with it, and the hon. Member objects to, but I am not happy for that to be done in Europe.

Mr. Kennedy: The hour is late, and we are almost getting into Scottish political theology. I agree that we have a far too centralised constitutional settlement in the United Kingdom. In trying to draw a comparison between the 1707 Act and the events surrounding it and the Maastricht treaty, the hon. Gentleman overlooks something fundamental—federalism. Whether that word is acceptable, or used in its proper context in this country—or at least in a context that will be understood by our Community partners—it is certainly used in other countries, notably Germany, essentially to mean decentralisation—and I must stress that.

Sir Teddy Taylor: rose—

Mr. Kennedy: Having lit the blue touch paper, I must give way to a Scot who represents another part of the Union.

Sir Teddy Taylor: While the hon. Member might be right in thinking that the Commission and the Council will be moderate and reasonable in applying the terms of article 104c, does he accept that the wording is such that it could be applied restrictively and oppressively? As we do not know what the Commission or the Council is doing, would not it be far safer to have wording that avoided repressive, restrictive policies, which would simply add to unemployment and misery?

Mr. Kennedy: The constitution of the old Soviet Union promised every freedom under the sun, and, in respect of


Hong Kong, the Basic Law to which the Government of China have put their names guarantees all the things that all Members on both sides of the Committee would advocate. However, experience, suspicion, cynicism and canniness about the former Soviet Union, as well as the Hong Kong settlement to come, make us worry. Others may take a different view, but I do not regard those who operate at Brussels level in the same way as I regarded the old Soviet Government or as I regard the current administration of old men in China. I am more relaxed and more laid back in my interpretation of the words in this part of the article than the hon. Member for Southend, East (Sir T. Taylor).
This applies not least to paragraph 3, which provides that, if there is excessive Government expenditure, leading to an excessive deficit, other relevant factors, including the medium-term economic and budgetary position of the member state, will be taken into account. It seems to me that that is a helpful addition, rather than something about which we should be excessively suspicious or over which we should lose sleep. [Laughter.] My words are being laughed at out of context.
Underlying the economic and monetary union mechanism that is built into the treaty is the need, if we are to overcome the suspicions and hostilities that have been expressed by hon. Members on both sides of the Committee, for more building in of European institutions that are felt by the citizens they are intended to serve to be European. As has been seen in the context of other parts of the legislation—we shall return to this matter at later stages—this can be done only by providing a more democratic structure and adopting a much more federal approach. That is the means of addressing these anxieties in the same way as several of the more positive ideals and aspirations of some of us.

Mr. Wood: rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 239, Noes 29.

Division No. 207]
[6.36 am


AYES


Adley, Robert
Brazier, Julian


Ainsworth, Peter (East Surrey)
Bright, Graham


Aitken, Jonathan
Brooke, Rt Hon Peter


Alexander, Richard
Brown, M. (Brigg & Cl'thorpes)


Amess, David
Browning, Mrs. Angela


Ancram, Michael
Bruce, Ian (S Dorset)


[...]Arbuthnot, James
Burns, Simon


Arnold, Jacques (Gravesham)
Burt, Alistair


Arnold, Sir Thomas (Hazel Grv)
Butterfill, John


Ashby, David
Carlisle, Kenneth (Lincoln)


Atkinson, Peter (Hexham)
Carrington, Matthew


Baker, Nicholas (Dorset North)
Channon, Rt Hon Paul


Baldry, Tony
Chapman, Sydney


Banks, Matthew (Southport)
Churchill, Mr


Banks, Robert (Harrogate)
Clarke, Rt Hon Kenneth (Ruclif)


Bates, Michael
Clifton-Brown, Geoffrey


Batiste, Spencer
Coe, Sebastian


Beresford, Sir Paul
Colvin, Michael


Blackburn, Dr John G.
Congdon, David


Booth, Hartley
Conway, Derek


Boswell, Tim
Coombs, Anthony (Wyre For'st)


Bottomley, Peter (Eltham)
Coombs, Simon (Swindon)


Bottomley, Rt Hon Virginia
Cope, Rt Hon Sir John


Bowden, Andrew
Couchman, James


Bowis, John
Curry, David (Skipton & Ripon)


Brandreth, Gyles
Dafis, Cynog





Davis, David (Boothferry)
Lester, Jim (Broxtowe)


Day, Stephen
Lidington, David


Deva, Nirj Joseph
Lightbown, David


Devlin, Tim
Lilley, Rt Hon Peter


Dorrell, Stephen
Llwyd, Elfyn


Douglas-Hamilton, Lord James
Luff, Peter


Dover, Den
Lyell, Rt Hon Sir Nicholas


Duncan, Alan
MacGregor, Rt Hon John


Dunn, Bob
MacKay, Andrew


Durant, Sir Anthony
Maclean, David


Elletson, Harold
McLoughlin, Patrick


Emery, Rt Hon Sir Peter
Madel, David


Evans, David (Welwyn Hatfield)
Maitland, Lady Olga


Evans, Jonathan (Brecon)
Malone, Gerald


Evans, Nigel (Ribble Valley)
Mans, Keith


Evans, Roger (Monmouth)
Marland, Paul


Evennett, David
Marshall, John (Hendon S)


Faber, David
Marshall, Sir Michael (Arundel)


Fabricant, Michael
Martin, David (Portsmouth S)


Fenner, Dame Peggy
Mawhinney, Dr Brian


Field, Barry (Isle of Wight)
Mellor, Rt Hon David


Fishburn, Dudley
Merchant, Piers


Forsyth, Michael (Stirling)
Michie, Mrs Ray (Argyll Bute)


Forth, Eric
Milligan, Stephen


Foster, Don (Bath)
Mitchell, Sir David (Hants NW)


Fox, Dr Liam (Woodspring)
Monro, Sir Hector


Fox, Sir Marcus (Shipley)
Moss, Malcolm


Freeman, Roger
Needham, Richard


French, Douglas
Nelson, Anthony


Gale, Roger
Neubert, Sir Michael


Gallie, Phil
Newton, Rt Hon Tony


Garnier, Edward
Nicholls, Patrick


Gillan, Cheryl
Nicholson, David (Taunton)


Goodlad, Rt Hon Alastair
Nicholson, Emma (Devon West)


Goodson-Wickes, Dr Charles
Norris, Steve


Gorst, John
Onslow, Rt Hon Sir Cranley


Grant, Sir Anthony (Cambs SW)
Oppenheim, Phillip


Greenway, Harry (Ealing N)
Ottaway, Richard


Greenway, John (Ryedale)
Page, Richard


Grylls, Sir Michael
Paice, James


Gummer, Rt Hon John Selwyn
Patnick, Irvine


Hague, William
Patten, Rt Hon John


Hamilton, Rt Hon Archie (Epsom)
Pattie, Rt Hon Sir Geoffrey


Hamilton, Neil (Tatton)
Pickles, Eric


Hanley, Jeremy
Porter, Barry (Wirral S)


Hargreaves, Andrew
Portillo, Rt Hon Michael


Harris, David
Powell, William (Corby)


Haselhurst, Alan
Rathbone, Tim


Hawkins, Nick
Redwood, John


Heald, Oliver
Renton, Rt Hon Tim


Heathcoat-Amory, David
Richards, Rod


Hill, James (Southampton Test)
Riddick, Graham


Hogg, Rt Hon Douglas (G'tham)
Robathan, Andrew


Horam, John
Roberts, Rt Hon Sir Wyn


Hordern, Rt Hon Sir Peter
Robertson, Raymond (Ab'd'n S)


Howarth, Alan (Strat'rd-on-A)
Robinson, Mark (Somerton)


Howell, Rt Hon David (G'dford)
Rowe, Andrew (Mid Kent)


Hughes, Simon (Southwark)
Rumbold, Rt Hon Dame Angela


Hunt, Rt Hon David (Wirral W)
Ryder, Rt Hon Richard


Hunt, Sir John (Ravensbourne)
Sackville, Tom


Hunter, Andrew
Sainsbury, Rt Hon Tim


Jack, Michael
Scott, Rt Hon Nicholas


Johnson Smith, Sir Geoffrey
Shaw, David (Dover)


Johnston, Sir Russell
Shaw, Sir Giles (Pudsey)


Jones, Gwilym (Cardiff N)
Shephard, Rt Hon Gillian


Jones, Ieuan Wyn (Ynys Môn)
Shepherd, Colin (Hereford)


Jopling, Rt Hon Michael
Smith, Tim (Beaconsfield)


Kellett-Bowman, Dame Elaine
Soames, Nicholas


Kennedy, Charles (Ross,C&S)
Spencer, Sir Derek


Key, Robert
Spicer, Sir James (W Dorset)


Kilfedder, Sir James
Spink, Dr Robert


Kirkhope, Timothy
Spring, Richard


Kirkwood, Archy
Sproat, Iain


Knight, Mrs Angela (Erewash)
Stanley, Rt Hon Sir John


Knight, Greg (Derby N)
Stephen, Michael


Knox, David
Streeter, Gary


Kynoch, George (Kincardine)
Sumberg, David


Lait, Mrs Jacqui
Sykes, John


Leigh, Edward
Taylor, John M. (Solihull)


Lennox-Boyd, Mark
Temple-Morris, Peter






Thomason, Roy
Wheeler, Rt Hon Sir John


Thompson, Sir Donald (C'er V)
Whitney, Ray


Thornton, Sir Malcolm
Whittingdale, John


Thurnham, Peter
Widdecombe, Ann


Townsend, Cyril D. (Bexl'yh'th)
Wiggin, Sir Jerry


Tracey, Richard
Wigley, Dafydd


Tredinnick, David
Willetts, David


Twinn, Dr Ian
Wolfson, Mark


Vaughan, Sir Gerard
Wood, Timothy


Viggers, Peter
Yeo, Tim


Waldegrave, Rt Hon William
Young, Sir George (Acton)


Walden, George



Waller, Gary
Tellers for the Ayes:


Wardle, Charles (Bexhill)
Mr. Robert Hughes and


Waterson, Nigel
Mr. Andrew Mitchell.


Wells, Bowen



NOES


Abbott, Ms Diane
Rooney, Terry


Betts, Clive
Rowlands, Ted


Brown, N. (N'c'tle upon Tyne E)
Shore, Rt Hon Peter


Campbell-Savours, D. N.
Simpson, Alan


Chisholm, Malcolm
Skinner, Dennis


Cryer, Bob
Smith, Andrew (Oxford E)


Cunliffe, Lawrence
Smith, Llew (Blaenau Gwent)


Davies, Rt Hon Denzil (Llanelli)
Spearing, Nigel


Davis, Terry (B'ham, H'dge H'l)
Taylor, Sir Teddy (Southend, E)


Dixon, Don
Walker, Bill (N Tayside)


Foster, Rt Hon Derek
Winnick, David


Godman, Dr Norman A.
Wray, Jimmy


Gould, Bryan



Grocott, Bruce
Tellers for the Noes:


Howarth, George (Knowsley N)
Mr. Ron Leighton and


Livingstone, Ken
Mr. Peter Hain.


McMaster, Gordon

Question accordingly agreed to.

Question put accordingly, That the amendment be made:—

The Committee divided: Ayes 26, Noes 245.

Division No. 208]
[6 51 am


AYES


Abbott, Ms Diane
McAllion, John


Beggs, Roy
McMaster, Gordon


Campbell-Savours, D. N.
Rogers, Allan


Cash, William
Rooney, Terry


Chisholm, Malcolm
Rowlands, Ted


Cook, Frank (Stockton N)
Shore, Rt Hon Peter


Cryer, Bob
Simpson, Alan


Cunliffe, Lawrence
Skinner, Dennis


Davies, Rt Hon Denzil (Llanelli)
Smith, Llew (Blaenau Gwent)


Davis, Terry (B'ham, H'dge H'l)
Spearing, Nigel


Dixon, Don
Winnick, David


Godman, Dr Norman A.
Wray, Jimmy


Gould, Bryan



Howarth, George (Knowsley N)
Tellers for the Ayes


Jones, Lynne, (B'ham S O)
Mr. Peter Hain and


Livingstone, Ken
Mr. Ron Leighton


NOES


Adley, Robert
Blackburn, Dr John G.


Ainsworth, Peter (East Surrey)
Booth, Hartley


Aitken, Jonathan
Boswell, Tim


Alexander, Richard
Bottomley, Peter (Eltham)


Amess, David
Bottomley, Rt Hon Virginia


Ancram, Michael
Bowden, Andrew


Arbuthnot, James
Bowis, John


Arnold, Jacques (Gravesham)
Brandreth, Gyles


Arnold, Sir Thomas (Hazel Grv)
Brazier, Julian


Ashby, David
Bright, Graham


Atkinson, Peter (Hexham)
Brooke, Rt Hon Peter


Baker, Nicholas (Dorset North)
Brown, M. (Brigg & Cl'thorpes)


Baldry, Tony
Browning, Mrs. Angela


Banks, Matthew (Southport)
Bruce, Ian (S Dorset)


Banks, Robert (Harrogate)
Burns, Simon


Bates, Michael
Burt, Alistair


Batiste, Spencer
Butterfill, John


Bellingham, Henry
Carlisle, Kenneth (Lincoln)


Beresford, Sir Paul
Carrington, Matthew





Channon, Rt Hon Paul
Jackson, Robert (Wantage)


Chapman, Sydney
Johnson Smith, Sir Geoffrey


Churchill, Mr
Johnston, Sir Russell


Clarke, Rt Hon Kenneth (Ruclif)
Jones, Gwilym (Cardiff N)


Clifton-Brown, Geoffrey
Jones, Ieuan Wyn (Ynys Môn)


Coe, Sebastian
Jopling, Rt Hon Michael


Colvin, Michael
Kellett-Bowman, Dame Elaine


Congdon, David
Kennedy, Charles (Ross,C&S)


Conway, Derek
Key, Robert


Coombs, Anthony (Wyre For'st)
Kilfedder, Sir James


Coombs, Simon (Swindon)
Kirkhope, Timothy


Cope, Rt Hon Sir John
Kirkwood, Archy


Cormack, Patrick
Knight, Mrs Angela (Erewash)


Couchman, James
Knight, Greg (Derby N)


Curry, David (Skipton & Ripon)
Knox, David


Dafis, Cynog
Kynoch, George (Kincardine)


Davis, David (Boothferry)
Lait, Mrs Jacqui


Day, Stephen
Leigh, Edward


Deva, Nirj Joseph
Lennox-Boyd, Mark


Devlin, Tim
Lester, Jim (Broxtowe)


Dorrell, Stephen
Lidington, David


Douglas-Hamilton, Lord James
Lightbown, David


Dover, Den
Lilley, Rt Hon Peter


Duncan, Alan
Lloyd, Peter (Fareham)


Dunn, Bob
Llwyd, Elfyn


Durant, Sir Anthony
Luff, Peter


Elletson, Harold
Lyell, Rt Hon Sir Nicholas


Emery, Rt Hon Sir Peter
MacGregor, Rt Hon John


Evans, David (Welwyn Hatfield)
Maclean, David


Evans, Jonathan (Brecon)
McLoughlin, Patrick


Evans, Nigel (Ribble Valley)
Madel, David


Evans, Roger (Monmouth)
Maitland, Lady Olga


Evennett, David
Malone, Gerald


Faber, David
Mans, Keith


Fabricant, Michael
Marland, Paul


Fenner, Dame Peggy
Marshall, John (Hendon S)


Field, Barry (Isle of Wight)
Marshall, Sir Michael (Arundel)


Fishburn, Dudley
Martin, David (Portsmouth S)


Forsyth, Michael (Stirling)
Mawhinney, Dr Brian


Forth, Eric
Mellor, Rt Hon David


Foster, Don (Bath)
Merchant, Piers


Fox, Dr Liam (Woodspring)
Michie, Mrs Ray (Argyll Bute)


Fox, Sir Marcus (Shipley)
Milligan, Stephen


Freeman, Roger
Mitchell, Andrew (Gedling)


French, Douglas
Mitchell, Sir David (Hants NW)


Gale, Roger
Monro, Sir Hector


Gallie, Phil
Moss, Malcolm


Garel-Jones, Rt Hon Tristan
Needham, Richard


Garnier, Edward
Nelson, Anthony


Gillan, Cheryl
Neubert, Sir Michael


Goodlad, Rt Hon Alastair
Newton, Rt Hon Tony


Goodson-Wickes, Dr Charles
Nicholls, Patrick


Gorst, John
Nicholson, David (Taunton)


Grant, Sir Anthony (Cambs SW)
Nicholson, Emma (Devon West)


Greenway, Harry (Ealing N)
Norris, Steve


Greenway, John (Ryedale)
Onslow, Rt Hon Sir Cranley


Grylls, Sir Michael
Oppenheim, Phillip


Gummer, Rt Hon John Selwyn
Ottaway, Richard


Hague, William
Page, Richard


Hamilton, Rt Hon Archie (Epsom)
Paice, James


Hamilton, Neil (Tatton)
Patten, Rt Hon John


Hanley, Jeremy
Pattie, Rt Hon Sir Geoffrey


Hargreaves, Andrew
Pickles, Eric


Harris, David
Porter, Barry (Wirral S)


Haselhurst, Alan
Portillo, Rt Hon Michael


Hawkins, Nick
Powell, William (Corby)


Heald, Oliver
Rathbone, Tim


Heathcoat-Amory, David
Redwood, John


Hill, James (Southampton Test)
Renton, Rt Hon Tim


Hogg, Rt Hon Douglas (G'tham)
Richards, Rod


Horam, John
Riddick, Graham


Hordern, Rt Hon Sir Peter
Robathan, Andrew


Howarth, Alan (Strat'rd-on-A)
Roberts, Rt Hon Sir Wyn


Howell, Rt Hon David (G'dford)
Robertson, Raymond (Ab'd'n S)


Hughes Robert G. (Harrow W)
Robinson, Mark (Somerton)


Hughes, Simon (Southwark)
Rowe, Andrew (Mid Kent)


Hunt, Rt Hon David (Wirral W)
Rumbold, Rt Hon Dame Angela


Hunt, Sir John (Ravensbourne)
Ryder, Rt Hon Richard


Hunter, Andrew
Sackville, Tom


Jack, Michael
Sainsbury, Rt Hon Tim






Scott, Rt Hon Nicholas
Tredinnick, David


Shaw, David (Dover)
Trotter, Neville


Shaw, Sir Giles (Pudsey)
Twinn, Dr Ian


Shephard, Rt Hon Gillian
Vaughan, Sir Gerard


Shepherd, Colin (Hereford)
Viggers, Peter


Smith, Tim (Beaconsfield)
Waldegrave, Rt Hon William


Soames, Nicholas
Walden, George


Spencer, Sir Derek
Waller, Gary


Spicer, Sir James (W Dorset)
Wardle, Charles (Bexhill)


Spink, Dr Robert
Waterson, Nigel


Spring, Richard
Wells, Bowen


Sproat, Iain
Wheeler, Rt Hon Sir John


Stanley, Rt Hon Sir John
Whitney, Ray


Steen, Anthony
Widdecombe, Ann


Stephen, Michael
Wiggin, Sir Jerry


Streeter, Gary
Wigley, Dafydd


Sumberg, David
Willetts, David


Sykes, John
Wolfson, Mark


Taylor, John M. (Solihull)
Wood, Timothy


Temple-Morris, Peter
Yeo, Tim


Thomason, Roy
Young, Sir George (Acton)


Thompson, Sir Donald (C'er V)



Thornton, Sir Malcolm
Tellers for the Noes:


Thurnham, Peter
Mr. Irvine Patnick and


Townsend, Cyril D. (Bexl'yh'th)
Mr. Andrew Mackay.


Tracey, Richard

Question accordingly negatived.

Mr. Spearing: On a point of order, Mr. Morris. The Committee has now been sitting for 14 hours. Would you accept a motion to move progress?

The Chairman: Yes. I shall put that Question now.

Motion made, and Question put, That the Chairman do report progress and ask leave to sit again.

Mr. Cryer: On a point of order, Mr. Morris.

The Chairman: Order. I have accepted a point of order, and have already put the Question.

The Committee proceeded to a Division:—

Mr. Spearing: (seated and covered): On a point of order, Mr. Morris. I do not like wearing the hat, but I wish to make a serious point, and this is the only way in which I can do so. I asked permission to move to report progress, and you said that you were prepared to accept a motion. Then my hon. Friend the Member for Bradford, South (Mr. Cryer) rose on a point of order. I therefore sat down, because a point of order takes precedence. [HON. MEMBERS: "No."] I was prepared to speak, and I believe that under the Standing Orders of the House, if an occupant of the Chair accepts a motion to report progress and an hon. Member has suggested that he wishes to move it, and to speak to it—I gave you notice of my intentions, because I wished to speak to the motion—the Committee should have an opportunity to debate it, if that is necessary. I wished to speak on the Question that you put, Mr. Morris, and I think that you knew that that was my intention.

The Chairman: I am most grateful to the hon. Gentleman. He is quite right; he gave me notice that he intended to raise the point of order, and that enabled me to check on the Standing Orders and to weigh up the situation. Standing Order 34(1) says:
If…the chairman, shall be of opinion that a dilatory motion is an abuse of the rules of the House, he may forthwith put the question thereupon from the chair, or he may decline to propose the question thereupon to the…committee.
I decided to put the Question forthwith. It has been put. It was proposed and it was opposed. Therefore, there is a Division. Therefore, we shall proceed.

Mr. Peter Bottomley: (seated and covered): On a point of order, Mr. Morris. May I inform you that not only did those who wanted to speak after you had put the motion rise after you had done so, but we are also expecting many more hon. Members to return for a continuation of the debate, and it would be convenient for most of them to find that the debate was continuing?

The Chairman: It is not for me to anticipate who may be coming to the debate. I accepted the motion from the hon. Member for Newham, South (Mr. Spearing).

The Committee having divided: Ayes 35, Noes 244.

Division No. 209]
[7.05 am


AYES


Abbott, Ms Diane
McAvoy, Thomas


Barnes, Harry
McMaster, Gordon


Beggs, Roy
Miller, Andrew


Betts, Clive
Rogers, Allan


Campbell-Savours, D. N.
Rooney, Terry


Chisholm, Malcolm
Ross, William (E Londonderry)


Cook, Frank (Stockton N)
Rowlands, Ted


Cryer, Bob
Shore, Rt Hon Peter


Cunliffe, Lawrence
Simpson, Alan


Davies, Rt Hon Denzil (Llanelli)
Skinner, Dennis


Davis, Terry (B'ham, H'dge H'l)
Smith, Andrew (Oxford E)


Dixon, Don
Smith, Llew (Blaenau Gwent)


Flynn, Paul
Spearing, Nigel


Godman, Dr Norman A.
Winnick, David


Gould, Bryan
Wray, Jimmy


Grocott, Bruce



Hain, Peter
Tellers for the Ayes:


Howarth, George (Knowsley N)
Mr. Ron Leighton and


Jones, Lynne (B'ham S O)
Mr. Ken Livingstone.


McAllion, John



NOES


Adley, Robert
Clifton-Brown, Geoffrey


Ainsworth, Peter (East Surrey)
Coe, Sebastian


Aitken, Jonathan
Colvin, Michael


Alexander, Richard
Congdon, David


Amess, David
Conway, Derek


Ancram, Michael
Coombs, Anthony (Wyre For'st)


Arbuthnot, James
Coombs, Simon (Swindon)


Arnold, Jacques (Gravesham)
Cope, Rt Hon Sir John


Arnold, Sir Thomas (Hazel Grv)
Cormack, Patrick


Ashby, David
Couchman, James


Atkinson, Peter (Hexham)
Curry, David (Skipton & Ripon)


Baker, Nicholas (Dorset North)
Dafis, Cynog


Baldry, Tony
Davis, David (Boothferry)


Banks, Matthew (Southport)
Day, Stephen


Banks, Robert (Harrogate)
Deva, Nirj Joseph


Bates, Michael
Devlin, Tim


Batiste, Spencer
Dorrell, Stephen


Bellingham, Henry
Douglas-Hamilton, Lord James


Beresford, Sir Paul
Dover, Den


Blackburn, Dr John G.
Duncan, Alan


Booth, Hartley
Dunn, Bob


Boswell, Tim
Durant, Sir Anthony


Bottomley, Peter (Eltham)
Elletson, Harold


Bottomley, Rt Hon Virginia
Emery, Rt Hon Sir Peter


Bowden, Andrew
Evans, David (Welwyn Hatfield)


Brandreth, Gyles
Evans, Jonathan (Brecon)


Brazier, Julian
Evans, Nigel (Ribble Valley)


Bright, Graham
Evans, Roger (Monmouth)


Brooke, Rt Hon Peter
Evennett, David


Brown, M. (Brigg & Cl'thorpes)
Faber, David


Browning, Mrs. Angela
Fabricant, Michael


Bruce, Ian (S Dorset)
Fenner, Dame Peggy


Burns, Simon
Field, Barry (Isle of Wight)


Burt, Alistair
Forsyth, Michael (Stirling)


Butterfill, John
Forth, Eric


Carlisle, Kenneth (Lincoln)
Foster, Don (Bath)


Carrington, Matthew
Fox, Dr Liam (Woodspring)


Channon, Rt Hon Paul
Fox, Sir Marcus (Shipley)


Chapman, Sydney
Freeman, Roger


Churchill, Mr
French, Douglas


Clarke, Rt Hon Kenneth (Ruclif)
Gale, Roger






Gallie, Phil
Michie, Mrs Ray (Argyll Bute)


Garel-Jones, Rt Hon Tristan
Mitchell, Andrew (Gedling)


Garnier, Edward
Mitchell, Sir David (Hants NW)


Gillan, Cheryl
Monro, Sir Hector


Goodlad, Rt Hon Alastair
Moss, Malcolm


Goodson-Wickes, Dr Charles
Needham, Richard


Gorst, John
Nelson, Anthony


Grant, Sir Anthony (Cambs SW)
Neubert, Sir Michael


Greenway, Harry (Ealing N)
Newton, Rt Hon Tony


Greenway, John (Ryedale)
Nicholls, Patrick


Grylls, Sir Michael
Nicholson, David (Taunton)


Gummer, Rt Hon John Selwyn
Nicholson, Emma (Devon West)


Hague, William
Norris, Steve


Hamilton, Rt Hon Archie (Epsom)
Onslow, Rt Hon Sir Cranley


Hamilton, Neil (Tatton)
Oppenheim, Phillip


Hanley, Jeremy
Ottaway, Richard


Hannam, Sir John
Page, Richard


Hargreaves, Andrew
Paice, James


Harris, David
Patten, Rt Hon John


Haselhurst, Alan
Pattie, Rt Hon Sir Geoffrey


Hawkins, Nick
Pickles, Eric


Heald, Oliver
Porter, Barry (Wirral S)


Heathcoat-Amory, David
Portillo, Rt Hon Michael


Hendry, Charles
Powell, William (Corby)


Higgins, Rt Hon Sir Terence L.
Rathbone, Tim


Hill, James (Southampton Test)
Redwood, John


Hogg, Rt Hon Douglas (G'tham)
Renton, Rt Hon Tim


Horam, John
Richards, Rod


Hordern, Rt Hon Sir Peter
Riddick, Graham


Howarth, Alan (Strat'rd-on-A)
Robathan, Andrew


Howell, Rt Hon David (G'dford)
Roberts, Rt Hon Sir Wyn


Hughes Robert G. (Harrow W)
Robertson, Raymond (Ab'd'n S)


Hughes, Simon (Southwark)
Robinson, Mark (Somerton)


Hunt, Rt Hon David (Wirral W)
Rowe, Andrew (Mid Kent)


Hunt, Sir John (Ravensbourne)
Rumbold, Rt Hon Dame Angela


Hunter, Andrew
Ryder, Rt Hon Richard


Jack, Michael
Sackville, Tom


Jackson, Glenda (H'stead)
Sainsbury, Rt Hon Tim


Jackson, Robert (Wantage)
Scott, Rt Hon Nicholas


Johnson Smith, Sir Geoffrey
Shaw, David (Dover)


Johnston, Sir Russell
Shaw, Sir Giles (Pudsey)


Jones, Gwilym (Cardiff N)
Shepherd, Colin (Hereford)


Jones, Ieuan Wyn (Ynys Môn)
Smith, Tim (Beaconsfield)


Jopling, Rt Hon Michael
Soames, Nicholas


Kellett-Bowman, Dame Elaine
Spencer, Sir Derek


Kennedy, Charles (Ross,C&S)
Spicer, Sir James (W Dorset)


Key, Robert
Spring, Richard


Kilfedder, Sir James
Sproat, Iain


King, Rt Hon Tom
Stanley, Rt Hon Sir John


Kirkhope, Timothy
Steen, Anthony


Kirkwood, Archy
Stephen, Michael


Knight, Mrs Angela (Erewash)
Streeter, Gary


Knight, Greg (Derby N)
Sumberg, David


Knox, David
Sykes, John


Kynoch, George (Kincardine)
Taylor, John M. (Solihull)


Lait, Mrs Jacqui
Temple-Morris, Peter


Leigh, Edward
Thomason, Roy


Lennox-Boyd, Mark
Thompson, Sir Donald (C'er V)


Lidington, David
Thornton, Sir Malcolm


Lightbown, David
Thurnham, Peter


Lilley, Rt Hon Peter
Townsend, Cyril D. (Bexl'yh'th)


Lloyd, Peter (Fareham)
Tracey, Richard


Llwyd, Elfyn
Tredinnick, David


Luff, Peter
Trotter, Neville


Lyell, Rt Hon Sir Nicholas
Twinn, Dr Ian


MacGregor, Rt Hon John
Vaughan, Sir Gerard


Maclean, David
Viggers, Peter


McLoughlin, Patrick
Waldegrave, Rt Hon William


Madel, David
Walden, George


Maitland, Lady Olga
Waller, Gary


Malone, Gerald
Wardle, Charles (Bexhill)


Mans, Keith
Waterson, Nigel


Marland, Paul
Wells, Bowen


Marshall, John (Hendon S)
Wheeler, Rt Hon Sir John


Marshall, Sir Michael (Arundel)
Whitney, Ray


Martin, David (Portsmouth S)
Widdecombe, Ann


Mawhinney, Dr Brian
Wiggin, Sir Jerry


Mayhew, Rt Hon Sir Patrick
Wigley, Dafydd


Mellor, Rt Hon David
Willetts, David


Merchant, Piers
Wolfson, Mark





Wood, Timothy
Tellers for the Noes:


Yeo, Tim
Mr. Irvine Patrick and


Young, Sir George (Acton)
Mr. Andrew Mackay.

Question accordingly negatived.

Mr. Spearing: On a point of order, Mr. Morris. I wonder whether you can help the Committee and me with two specific matters. The first relates to the use of the article of headgear. There has been some comment oustide this place on the matter. I hope that you will agree that the recent incident shows a legitimate use of something on the head when an hon. Member raises a legitimate point of order during a Division. The Committee might bear that in mind when people criticise procedures which appear arcane but which have some use.
My second point relates to the Standing Order which you helpfully quoted in the exchanges. The Committee realises that any Chairman of any Committee can at any time refuse a motion to report progress when, clearly, that is not an issue on which there can be legitimate points of order. When the use of the word "abuse" is quoted from the Standing Orders, you have the option of taking it forthwith and not permitting a short debate. I am sure that you will rule that such a debate can be relatively short because any hon. Member has the power to move a closure on a debate and for the Chair to accept it, even after 10 minutes, quarter of an hour or half an hour, as the Chair supposes. I hope that you will confirm that that is trite.
My main point is the extent to which—[Interruption.] I am sure that you will accept that I have asked for three rulings so far. My fourth point relates to the use and interpretation of the word "abuse". It would be a pity if the difficulties which we have just experienced were repeated. I submit that, when the Committee has done eight hours overtime—[Interruption.] The choice to do that was in the hands of Her Majesty's Government, not the House of Commons. It is the choice of the Government, not the Committee, to keep us here.
Moreover, the debates have been of mountainous economic and national significance, which the media may not have covered. When the Government keep us here, it is not an abuse of the Committee for there to be a short debate on the Question that we report progress, because clearly the political area that has been covered in that time is great. I hope that you will be able to clarify that matter, Mr. Morris.

The Chairman: I am grateful to the hon. Gentleman. The Committee will know that he has been particularly assiduous in his attendance through the night. Headgear is a matter for the Procedure Committee. The word "abuse" is quoted in the Standing Order, so I have no choice but to use that word. When the hon. Gentleman moved his motion, the Chair had to decide one of three courses of action. The Chair could decide to refuse the motion altogether, to allow a Division only or to allow a debate and a Division. I chose the middle course.

Mr. Cryer: On a point of order, Mr. Morris. In applying the Standing Orders, the Chairman obviously uses his objective assessment. What worries me is that, as I came in and sat down on the Front Bench below the Gangway, I heard distinctly—it was not particularly inaudible—a Tory Whip tell the Liberals that my hon. Friend intended to move to report progress, that the motion would be taken immediately, and that it would be


defeated and we would carry on. If that is the case, the source of information must have been yourself. Therefore, the interpretation is that you acted in collusion with the Tory Whips.

The Chairman: Order. To the best of my knowledge, the hon. Gentleman has only recently returned to the Chamber. When the hon. Member for Newham, South (Mr. Spearing) was kind enough to come to the Chair to say that he proposed to raise a point of order and move to report progress, it was my responsibility to the Committee to check the Standing Orders and the options available to me. If any hon. Member came to the Chair and asked me what the options were, I would give them guidance. I take my decision entirely on my own. Those who can recognise what interpretation I may put on it simply show their political acumen.

Mr. Bruce Grocott: On a point of order, Mr. Morris. The argument is not about any judgment that you made but about the fact that the discussion between you and my hon. Friend the Member for Newham, South (Mr. Spearing)—in which he sought clarification of what would be the response to his suggestion that the Committee should report progress—became known to Conservative Members, and in particular the Government Whips.
The issue is serious. We are well accustomed to the coalition between the Tory party and the Liberals, which worked closely through the night. [Interruption.] I know that Conservative Members are tired and overwrought, but they should listen to this. This is a matter for all Members, not just for my hon. Friend the Member for Newham, South, who raised the point. When Members seek the guidance of the Chair, it ought to be assumed that it is a private conversation in which an hon. Member seeks guidance.
I fully understand that it is not easy in the context of a crowded House to hold a private conversation, but clearly the Government Whips knew what action you were likely to take, Mr. Morris. That is not within the normal processes of the House. If it is impossible for Members to seek guidance privately from you because of the nature of the building, some machinery must be found whereby private advice can be received. It is wrong that the Government Whips knew and fully understood the decision that was made. [Interruption.] The hon. Member for Dover (Mr. Shaw) is getting excited and uses the word "stupid".

The Chairman: Order. I hope that I can help the hon. Gentleman. The Opposition Chief Whip came to see me in the early hours of this morning and sought guidance. I gave the right hon. Gentleman guidance. I have no control over what happens to the results of the guidance that I give, but the hon. Gentleman sought guidance and I was able to give it. It may well be that that guidance was not the guidance that the Government Whips thought likely, and I suspect that it was not. With respect, it is my job to give guidance on the options open to me and how I see a position.

Several hon. Members: rose—

The Chairman: Order. I hope that these are new points of order.

Mr. Gould: On a point of order, Mr. Morris. You kindly and correctly set out the options with which you were confronted when my hon. Friend the Member for Newham, South (Mr. Spearing) approached you with the suggestion that he might move to report progress. Hon. Members on all sides of the House understand that that is a matter for your discretion and you have explained the decision that you made. However, you also said—you elaborated that point in your last statement—that if you were approached by any hon. Member, you would discuss the options before you and the likely course—

The Chairman: Order. The hon. Gentleman may come back. I do not discuss the options; I clarify what the options are.

Mr. Gould: I am willing to use that phraseology. You clarify the options available to you.
My hon. Friend the Member for Newham, South will confirm that he was unaware of the option, choice or decision that you were likely to make.

The Chairman: The hon. Member for Newham, South did not come back and ask me.

Mr. Gould: In that case, Mr. Morris, we are again on all fours. We agree that the hon. Member who approached you with a view to moving that motion departed from his conversation with you unaware of the decision that you were likely to take. My question to you, Mr. Morris, is that when you said that any—

The Chairman: Order. All hon. Members depart from me unaware of what decision I shall make. The clarification they receive, if they so ask, is what options are available.

Mr. Gould: Nevertheless, although my hon. Friend the Member for Newham, South was left in that situation, it is a matter of record, unless one disputes the evidence of my hon. Friend the Member for Bradford, South (Mr. Cryer), that other hon. Members appeared to know what your decision was likely to be. When you said that any hon. Member could approach you to ask for a clarification of the options, are we to understand that that includes a Government Whip? Did that happen on that occasion, and was that the way in which a Government Whip appeared to know what your decision would be?

The Chairman: It is perfectly true. The Government Whip sought clarification on the Standing Order and what the options are. That was available to any hon. Member, but nobody knew what decision I was going to make. Nor did any hon. Member earlier in the morning know what decision I was going to make on the clarification I gave the Opposition Chief Whip. What hon. Members appear to judge from that is not for me. Hon. Members know that if there are three options, they have only three possible guesses, and they must make a judgment, based on the way the Committee has proceeded and the attitude I have taken, as to what I am likely to conclude. It is part of the skill of hon. Members in all parts of the House to interpret the situation.

Mr. Rowlands: On a point of order, Mr. Morris. As the Committee might come across this again, I wonder whether we might understand the criteria used to decide whether one debates a motion to report progress. Did you


research the last precedent when the House sat for 14 hours and the Chairman ruled that the report progress motion should not be debated?

The Chairman: The Chair makes a judgment on the particular point at the time it arises. The precedent is in the Standing Order.

Mr. Peter Bottomley: Further to that point of order, Mr. Morris. The House heard you say that you have to act in public on the things that happen in public. The last question about the Chair refusing to accept a motion cannot be relevant, because the motion was accepted, not rejected.
The second point, Mr. Morris, is that, when the hon. Member for Newham, South (Mr. Spearing) sought to move the motion, it was accepted by the Chair. The hon. Member for Newham, South did not rise, and only after the question had been put did the hon. Member for Bradford, South (Mr. Cryer) rise. Surely these points of order are, in effect, trying to delay the proceedings, in the same way as the motion sought to delay the proceedings?

The Chairman: Order. No, they were perfectly fair points of order. If I may say so, I have checked on the rules of the House and on the Standing Orders, and I am working within the Standing Orders. I regret that some hon. Members perhaps do not fully understand the Standing Orders, but that is not the responsibility of the Chair. I have now clarified those Standing Orders. I have clarified the three options that were available to me, and I have decided on this occasion on the middle course. Next time I might decide something different, but that is a matter of judgment for the Chair. I hope, therefore, that the Committee will accept that.

Mr. Rowlands: Further to my point of order, Mr. Morris. Just as Standing Orders are vital to the House, so are precedents. It is therefore not unreasonable for an hon. Member like me to request you to discover for us when was the last time that a Chair, after 14 hours of debate, actually chose not to allow the "report progress" motion to be debated. It is a perfectly reasonable request.

The Chairman: Order. I respectfully suggest to the hon. Gentleman that my job here is to chair the Committee. He can go to the Library and ask that question. [Interruption.]

Mr. Denzil Davies: I beg to move amendment No. 81, in page 1, line 9, after "II", insert
'(with the exception of those Articles and Protocols set out in Schedule [Second stage for achieving economic and monetary union.])'

The Chairman: With this, it will be convenient also to discuss the following:
Amendment No. 83, in clause 1, Page 1, line 9, after 'II', insert
'(other than Article 109h)'.
Amendment No. 170, in clause 1, page 1, line 9, after 'II', insert
'(except Article 73e on page 14 of Cm 1934)'.
Amendment No. 171, in clause 1, page 1, line 9, after 'II', insert
'(except Article 73f on page 14 of Cm 1934)'.
Amendment No. 172, in clause 1, page 1, line 9, after 'II', insert
'(except Article 73g on page 14 of Cm 1934)'.

Amendment No. 196, in clause 1, page 1, line 9, after 'II', insert
'(except Article 3a(2) on page 10 of Cm 1934'.
Amendment No. 200, in clause 1, page 1, line 9, after 'II', insert
'(except Article 73g(2) on page 14 of Cm 1934'.
Amendment No. 204, in clause 1, page I, line 9, after 'II', insert
'(except Article 109e(2(a)) on page 25 of Cm 1934'.
Amendment No. 206, in clause 1, page 1, line 9, after 'II', insert
'(except Article 109e(5) on page 25 of Cm 1934'.
Amendment No. 207, in clause 1, page 1, line 9, after 'II', insert
'(except Article 109(f)'.
Amendment No. 210, in clause 1, page 1, line 9, after 'II', insert
'(except Article 109m(1)'.
Amendment No. 211, in clause 1, page 1, line 9, after 'II' insert
'except Article 109m(2)'.
Amendment No. 319, in clause 1, page I, line 9, after 'II', insert
'(except Article 3a (3) on page 10 of Cm. 1934).'.
Amendment No. 333, in clause 1, page 1, line 9, after 'II', insert
'(except paragraph 5 of Article 109e on page 25 of Cm. 1934)'.
Amendment No. 363, in clause 1, page 1, line 9, after 'II', insert
'except Article 3(a) Paragraph 3 as referred to in Article G on page 10 of Command Paper number 1934'.
Amendment No. 366, in clause 1, page 1, line 9, after 'II' insert
'except Article 73a as referred to in Article G on page 13 of Command Paper number 1934'.
Amendment No. 367, in clause 1, page 1, line 9, after 'II', insert
'except Article 73b as referred to in Article G on page 13 of Command Paper number 1934'.
Amendment No. 368, in clause 1, page 1, line 9, after 'II', insert
'except Article 73c as referred to in Article G on page 13 of Command Paper number 1934'.
Amendment No. 369, in clause 1, page 1, line 9, after 'II', insert
'except Article 73D as referred to in Article G on page 14 of Command Paper number 1934'.
Amendment No. 370, in clause 1, page 1, line 9, after 'II', insert
'except Article 73H as referred to in Article G on page 15 of Command Paper number 1934'.
Amendment No. 380, in clause 1, page 1, line 9, after 'II', insert
'except Article 109g as referred to in Article G on page 27 of Command Paper number 1934'.
Amendment No. 381, in clause 1, page 1, line 9, after 'II', insert
'except Article 109i as referred to in Article G on pages 27 and 28 of Command Paper number 1934'.
Amendment No. 382, in clause 1, page 1, line 9, after 'II', insert
'except Article 1091 as referred to in Article G on pages 29 and 30 of Command Paper number 1934'.
Amendment No. 409, in clause 1, page 1, line 9, after 'II', insert
'(except the Protocol on the Convergence Criteria referred to in Article 109j of the Treaty establishing the European Community on page 112 of Cm 1934).'.
Amendment No. 440, in clause 1, page 1, line 9, after 'II', insert
'(except from "(79)" to "force" on page 58 of Cm. 1934)'.


Amendment No. 51, in clause 1, page 1, line 10, after '1992', insert
'but not Article 109c in Title II thereof".
Amendment No. 60, in clause 1, page 1, line 10, after '1992', insert
'but not the Protocol on the statute of the European Monetary Institute.'.
Amendment No. 205, in clause 1, page 1, line 10, after '1992', insert
'except Article 109e of Title VI of Title II thereof.
Amendment No. 208, in clause 1, page 1, line 10, after '1992', insert
'but not Article 109j of Title VI of Title II thereof'.
Amendment No. 209, in clause 1, page 1, line 10, after '1992', insert
'but not Article 109k(1) of Title VI of Title II thereof'.
Amendment No. 225, in clause 1, page 1, line 10, after '1992', insert
'but not the Protocol on the Transition to the Third Stage of Economic and Monetary Union'.
Amendment No. 400, in clause 1, page 1, line 13, after 'Community', insert
'with the exception of the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland on pages 114 to 116 of Cm 1934.'.
Amendment No. 444, in clause 2, page 1, line 19, after
'intends', insert 'not'.
Amendment No. 35, in clause 2, page 1, line 23, at end add
';but in circumstances where convergence in economic performance as establshed in Article 109 has been achieved and where other major member states have decided to move to the third stage, the proposal for the United Kingdom to do so shall be placed before Parliament for affirmation.'.
Amendment No. 42, in clause 2, page 1, line 23, at end add
'and the decision in principle so to move has first been approved by a separate Act of Parliament'.
Amendment No. 420, in clause 2, page 1, line 23, at end add
'and unless Her Majesty's Government has reported to Parliament on its proposals for the co-ordination of economic policies, its role in the European Council of Finance Ministers (ECOFIN) in pursuit of the objectives of Article 2 as provided for in Articles 103 and 102a, and the work of the European Monetary Institute in preparation for Economic and Monetry Union.'.
Amendment No. 39, in clause 2, page 1, line 23, at end add
'(2) As from the beginning of the year 1993 the Secretary of State shall—

(a) not less often than once in every six months, lay before Parliament a report stating what, if any, steps are being taken by the United Kingdom with a view to moving to the third stage, and
(b) seek Parliamentary approval for any such steps as are being, or are proposed to be, taken with that objective in view.'.

New clause 56—Convergence for economic and monetary union: reporting fulfilment—
'In complying with the requirement to submit information under Article 103(3), Her Majesty's Government shall report annually to Parliament on the extent of its fulfilment of the criteria set out in Article 109j, and shall include within its reports a statement on the implementation of a programme to improve economic performance, including measures for investment and employment measures to realise the objectives of Article 2.'.
Amendment No. 82, new schedule:—
'SECOND STAGE FOR ACHIEVING ECONOMIC AND MONETARY UNION

(1) Article 109e.

(2) Article 109f
(3) Protocol on the Statute of the European Monetary Institute.'.

Mr. Davies: The amendment mentions "Schedule". In this case the word "Schedule" refers to the second stage of economic and monetary union.

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes): Order. I wish to hear what the hon. Gentleman has to say, but it is impossible if there is too much noise. Will those who are leaving please go quickly and quietly?

Mr. Davies: Amendment No. 81 seeks to strike out the whole of the second stage of economic and monetary union, including the European monetary institute and the protocol related to it. Perhaps I may respectfully remind the Committee that this group of amendments deals with the transitional arrangements, with the second stage and the third stage, so it covers the whole of the process towards the final act of a single currency, if that should happen. Amendment No. 409 seeks to exclude the protocol on the convergence criteria which have to be achieved before a member state can enter stage 3. Amendments Nos. 38 and 381 deal with the balance of payments crisis and the power given to the Commission, within those stages, to control and supervise any action taken by a nation state in respect of that balance of payments crisis.
Although chapter 4 of the treaty of union on page 25 is headed "Transitional Provisions", it deals in the main with the second stage and then with the third stage.
Before I discuss those, perhaps I could clarify the legal position. I should like the Financial Secretary to answer some questions. Despite the fact that he has been up all night, he is bright-eyed and bushy-tailed, and I am sure that he will courteously seek to answer questions on the literal interpretation of the text, which is not easy to understand. I give him warning that I shall have to ask such questions.
I am glad to see the Attorney-General here. During most of the debates he has kept a watching brief. We have not had the benefit of his words, but he has looked wise, as Attorneys-General are apparently supposed to do. I shall try to set out the legal position as I understand it. Some of the amendments may be desirable from the Government's point of view, but they may not be necessary—to use the language of the Foreign Secretary or of the Attorney-General.
Stage 2 of economic and monetary union imposes treaty obligations on us. We have not acquired an opt-in or an opt-out to stage 2, which is a treaty obligation. We are not supposed to refer to the gentlemen in the Box, and I do not know whether they are Foreign Office legal advisers, but I see that they agree with me. I am not sure whether that is worrying.
To return to the Attorney-General's helpful intervention on amendment No. 27, when he said in so many words—I should have thought that it was a fairly simple legal point—that if one has a treaty obligation, one must incorporate it into domestic law. The corollary is that, if one has no treaty obligation, one has nothing to incorporate into domestic law.
According to the Government, amendment No. 27 did not create a treaty obligation, so nothing was put into domestic law; thus, it did not really matter what one put into that law.
Stage 3 does not involve any treaty obligations. The Financial Secretary did not say so in so many words, but I am not criticising him. He does not have the courage of the Minister of State, who rushes into the legal arguments with great enthusiasm. Therefore, any amendments to stage 3 are not fundamental to the treaty. I mention that to Members on the Labour Front Bench, so that if they wish to be courageous on this occasion and to vote on an amendment relating to stage 3, they need not worry, because the treaty will be fine and can still be ratified. I think that the Attorney-General will confirm that that is correct. I want my hon. Friends on the Front Bench to be careful not to vote on stage 2 because it might badly hurt the treaty, which apparently the official Labour party supports.
First, I will deal with stage 2. On page 25, the first paragraph of article 109e states:
The second stage for achieving economic and monetary union shall begin on 1 January 1994.
There is not much time. The treaty may or may not be ratified by then—who knows? No one knows what will happen in the Danish referendum, or in this House and the other place.
Even if the treaty is ratified by 1 August—let us give the Government some hope—there is not much time for the Financial Secretary, the Foreign Office and the Treasury to get their tackle in order, as we shall be straight into stage 2 of economic and monetary union, which is obligatory. We cannot plead the opt-out or the opt-in.
Article 109e continues by stating that even "Before that date"—presumably the date when every country has ratified—and the second stage "each Member State shall" do certain things. In paragraph 2(a) we are told that each member state shall adopt multiannual programmes. I suppose I know what multiannual programmes are—lots of programmes in one year, I take it. As this is Treasury stuff, I hope that the Financial Secretary will be able to tell us whether we are to embark on these multiannual programmes in the middle of this year. These are very important programmes.

Mr. Rowlands: I see that the Financial Secretary is shaking his head, but the achievement of economic and monetary union must be the purpose of a multiannual programme.

Mr. Davies: I hope that the Financial Secretary was not indicating dissent. We do not know who is watching these debates. We do not know whether the Commission has a magic eye. We have heard in previous debates that member states must be careful, that they are not supposed to interfere with the Commission. Others may say what they like, but Ministers have to be careful. I hope that we shall be told that these multiannual programmes are starting. Otherwise, after the treaty has been ratified, the Government will be breaking one of the first articles. That would be a bad start.

Mr. George Howarth: Which one?

Mr. Davies: I shall try to answer my hon. Friend's question, and the Financial Secretary will no doubt provide clarification. In fact, it seems that he is going to do so now.

Mr. Dorrell: The Red Book is a multiannual programme. It was laid before the House on Budget day.

Mr. Davies: That is a multiannual programme, not just an annual programme?

Mr. Dorrell: Yes. A multiannual programme is one that publishes plans in respect of more than one year.

Mr. Davies: Now the Minister tells us. The Chancellor did not tell us, did he? I wondered why he was putting three Finance Bills into one, and three Budgets into one. They cover three years.

Mr. Spearing: Is my right hon. Friend aware that the words "multiannual programme" are used frequently by the European Community? The EC does not do this in relation to just one general matter of public expenditure, to which I think the Financial Secretary referred, but in relation to programme after programme, sometimes for five or six years ahead. It therefore commits expenditure well ahead of the annual budget. That is the way in which not only the multiannual programme but the whole budget commitment works, irrespective of future economic developments. This practice of our friends and neighbours across the channel has not been a major feature of the United Kingdom until recently.

Mr. Livingstone: Cannot the Government give us an explanation? What is the difference between this multiannual programme, about which they seem so happy, and the old five-year plans of Comrade Stalin, which they regarded as an appalling abuse of human rights which led to dictatorship? How can the Government prevent the multiannual programme from becoming a panoply of Stalinism and repression? What is the difference? Is there a difference?

Mr. Davies: My hon. Friend asks a very important question and no doubt the Financial Secretary will answer it. He has certainly given us a new name for the Red Book. "Multiannual programme" sounds much better.

Dr. Godman: I should like to offer a concrete example of the imposition of a multiannual programme by the European Community, not by a national Government. The programme to which I refer concerns the size of the United Kingdom fishing fleet. Several years ago the European Community instructed the United Kingdom Government to reduce the size of its fishing fleet, over a period of three years, by about 20 per cent. in terms of horse power and gross registered tonnage. That instruction came from the European Commission by way of a multiannual programme.

Mr. Davies: I am grateful to my hon. Friend, who is diligent and understands such matters.

Sir Teddy Taylor: Is not the hon. Member for Greenock and Port Glasgow (Dr. Godman) being a little unfair? Does he not appreciate that the European Community multiannual programmes have huge advantages in terms of flexibility over our programmes? The commitments in the Edinburgh budget are worth millions of pounds more than the available resources. A European Community


multiannual programme commits a country to spending far more money than it has. If we apply that principle to our resources, expenditure and budget, we can do extremely well. The method was used in 1988 when, because of a multiannual programme and working on a metric year of 10 months, it was possible to spend 20 per cent. more. I hope that the hon. Gentleman will not allow himself to throw out the possible advantages of the much greater degree of flexibility afforded by the EC's multiannual programmes, under which one can spend far more than one has, and nobody seems to complain.

Mr. Davies: Does my hon. Friend the Member for Newham, South (Mr. Spearing) wish to amplify the argument?

Mr. Spearing: The recent exchanges show the value of Committee procedure. Does my right hon. Friend agree that the introduction of commitments ahead of the raising of taxation strikes at the root of the financial power of the house over any Government who determine expenditure year on year? Making a commitment too far ahead—particularly in respect of the European Community—means that money is committed ahead of the economic circumstances and taxation at the time, which means that control over the Executive of the day is lost.

Mr. Davies: My hon. Friend is correct. I know something of the subject because, years ago, I used to have some ministerial responsibility—if that is not stretching it a bit—over the EEC budget. The Treasury was hard on the EEC budget and did not like the spending commitments whereby money was spent in one year and rolled over to the next, because the Treasury could not control the process. The Treasury was, rightly, austere.
No doubt in the laxer financial climate that prevails under the present Government—who create public sector borrowing requirements of up to £50 billion and more—the Treasury has been worn down. I am sure that the Financial Secretary can tell us.

Mr. Dorrell: The right hon. Gentleman is performing a remarkable feat: apparently he is signing up all his right hon. and hon. Friends to the sternest and strictest interpretation of the principle of annuality, which has historically been ascribed to Her Majesty's Treasury. That is something for which the Treasury is usually more criticised in the House than praised. Are we to take it that out of the window will go support for year-end flexibility and for taking a longer-term perspective? A multiannual programme is simply a commitment to look at an economic programme over more than one calendar year—in every other debate in which the subject has arisen in the House that policy has been accepted by both sides of the House as a good thing.

Mr. Davies: The Financial Secretary is perhaps making too much of the matter. I was saying that my hon. Friend the Member for Newham, South and the hon. Member for Southend, East (Sir T. Taylor) have argued that the way in which the EC has developed is different from the way in which the Treasury used to do things when I was a Treasury Minister. I was merely making a neutral statement. Perhaps Treasury Ministers then were pedantic, old-fashioned or wrong—but the Treasury always used to argue strongly against the idea of a carry-over. Obviously

it is somethimes necessary to adopt the carry-over policy when dealing with large projects, such as those relating to defence.
However, payments and commitments were constantly being made in relation to the Eurpoean budget and it was sometimes difficult to follow what was happening and to maintain control. The Treasury was sensible to do so then, but we now live in times of laxer control over public expenditure—as was made obvious by the figures that the Chancellor gave us a few weeks ago.

Mr. Tim Renton: I think that the right hon. Gentleman is suffering from a slight shortage of memory. He was in the Treasury when the Chancellor, now Lord Healey, introduced his Budget in 1975 or 1976. In that, as in today's Red Book, there was a carry-forward of anticipated expenditure for a number of years ahead. That led to an expected PSBR of many billions of pounds and caused great concern to those of us in opposition at that time. No doubt at that time the right hon. Gentleman defended the multiannual PSBR, the deficit on planned Government expenditure that was shown up in the Red Book. At heart, the right hon. Gentleman is a sensible man and knows that Governments enter into expenditure programmes that will run for some years. The multiannual programme is simply a forecast of the likely outturn over future years. The right hon. Gentleman must remember that from his years at the Treasury. The Treasury may have been lax in those days, too, when, as far as I remember, he was one of its more spendthrift members.

Mr. Davies: We certainly had many Budgets; it was a kind of multibudget era. But we had only one PSBR each year and we carried very few things forward. The Financial Secretary says that multiannual means carrying forward or rolling forward. At least he has explained what is meant by multiannual programmes.

Mr. Rowlands: The multiannual programme in this article has the specific purpose of achieving economic and monetary union. Does my right hon. Friend agree that one of the major purposes of the Red Book was to achieve economic and monetary union?

Mr. Davies: My hon. Friend is right. I was coming to that issue, because the Red Book is intended to ensure the lasting convergence—not just a one-off convergence—that is necessary for the achievement of economic and monetary union.
The Financial Secretary got into some difficulty, which may have been due to the lateness of the hour, when he was asked by my hon. Friend the Member for Oxford, East (Mr. Smith) what the Prime Minister meant when he told The Irish Times that he was in favour of economic and monetary union as it would put us at the heart of Europe and all that. The Financial Secretary wriggled. He said, "Ah, well, of course there are all kinds of economic and monetary union." He nods, but perhaps he is tired. He did not mention the hard ecu, but it was the sort of 13th currency that the Treasury and some guy in the City dreamt up to try to get out of this nonsense. It was a rather clever idea, but, unfortunately, nobody bought it.
There may be all sorts of economic and monetary unions, but this one cannot be interpreted flexibly, whatever else has been interpreted in that way. The Financial Secretary shakes his head again. What other economic and monetary union can it be? If I were debating


some other economic and monetary union I should be called to order. I am debating this one. In effect, it is monetary union because I do not know what economic union means. Monetary union is quite clear. We are told that the Red Book is intended to ensure the lasting convergence that is necessary for the achievement of economic and monetary union.

Mrs. Teresa Gorman: I congratulate the right hon. Gentleman on elucidating an issue that seems to have been missed by every hon. Member and certainly by the media. It is that propositions in the Bill have already been adopted into the practices of our budgeting structure. Another little item in the Budget caused some consternation and bamboozlement. It was VAT on fuel. That is the adoption of the concept of harmonisation of VAT because most member states have VAT on fuel and we will have a great deal more put on it before we see the end of that impost.

8 am

Mr. Davies: I had better be careful not to go down that particular road.
The Financial Secretary is studying the text of the treaty carefully, for which I am grateful. The Attorney-General has left—frankly, I do not blame him.
The multiannual programme must have regard to price stability. We are back to that again. The Government are doing all right with price stability at the moment, at 1·5 per cent. or 2 per cent., or 3 per cent. depending on whether it is the underlying rate. Perhaps next year, when the subsequent multiannual programme is published, the Financial Secretary will not be doing so well with price stability. I suspect that the pass has been sold and the Prime Minister realises that the British economic system needs inflation. We will return to that debate another time.
Article 109e states that the multiannual programme exists
for the achievement of economic and monetary union, in particular with regard to sound public finances".
That is a bit of a joke, with a £50 billion PSBR at 8·2 per cent. of GDP. That particular multiannual programme does not come anywhere near "sound public finances".
I do not think that next year's multiannual programme will do so, either. Will it be different, or does the current programme apply for three years? We have been given some Mickey Mouse figures that are supposed to allow forecasting of the PSBR for next year and the year after. I seem to remember that it was difficult to forecast on Friday the PSBR for Monday, let alone for three years ahead.
Sadly, whatever the Financial Secretary may say about his rolling programmes and the sophistication of public expenditure control—or the lack of it these days—the Government are not doing very well. There will be real problems. My hon. Friend the Member for Oxford, East mentioned flexibility. There is little flexibility in the treaty's provisions. The figure must fall and continue to fall to about 3·5 per cent. before too long—and that requirement must be observed because it is a treaty obligation. It is not an opt-out or opt-in. It must be done now, or at least when the treaty is ratified.
The Government claim that they will meet that obligation. They say, "We are all in favour of bringing

down the PSBR. We will have a balanced budget." The figure must fall to 3 per cent. because the stage 2 obligation is to bring it as close to 3 per cent. as they can.
Paragraph 3 states that many of the provisions
shall apply from the beginning of the second stage.
It is suggested that there is a cut-off point between stages 2 and 3, when we can sit back as though nothing happened at stage 2. The Financial Secretary offered an explanation earlier. Apparently, the House is to be given a marvellous choice—unlike the Messina conference, the British people and the House will have a marvellous choice, some time in the future, on whether they want to take a decision, unfettered and uncluttered by anything that has gone before, to go for a single currency and—dare I say it?—economic and monetary union.
It will not be like that, because stage 2 runs into stage 3—and the transitional provisions run into stage 2. It used to be said of nuclear strategy that it was a seamless web. When Ministers found themselves in difficulty over the nuclear deterrent—I am sure that the right hon. Member for Mid-Sussex (Mr. Renton), as a former Chief Whip and Foreign Office Minister remembers this—the stock phrase was "a seamless web". Well, this is almost a seamless web. By the time we get to stage 3, the web will have spun all around us by stage 2. But I see that the former Chief Whip is itching to intervene.

Mr. Renton: The right hon. Gentleman has egged me on to my feet.
In my interesting days as Chief Whip, or Patronage Secretary, I cannot recall hearing either the Labour party or the Conservative party described as a seamless web. It strikes me as an extraordinarily inapt description. I should have thought that both our parties were more like spiders' webs, full of little traps from which hon. Members appear. Does the right hon. Gentleman regard his party as a seamless web in regard to the issue of the Maastricht treaty? Far from it, I should have thought.

Mr. Davies: The right hon. Gentleman is not on his best form this morning—or perhaps I did not explain properly. I was using the phrase "seamless web" to describe the whole process of the deterrent, from the little shells that nearly blew up Germany to the big ones that blew up the world. The right hon. Gentleman was a disarmament Minister, but I remember being on a television programme with him during the Reykjavik summit: he had not a clue what was going on and nor had I. I am not sure that the right hon. Gentleman learnt very much in the Foreign Office.

Dr. Godman: My right hon. Friend quoted paragraph 3, which states that paragraphs 1, 9, 11 and 14 of article 104c are excluded from the second stage. Does he agree that some powerful sanctions still exist—for example, in paragraph 8 of article 104c—which can be levied against a recalcitrant member state? Cannot a Council censure such a state in public? That could be disastrous, in an election year, for the governing party that is being so censured.

Mr. Davies: Indeed. I was coming to article 104c. My hon. Friend is right: some of the more draconian paragraphs are excluded until stage 3 is reached—paragraphs 1, 9, 11 and 14. Paragraph 3, however, states:
If a Member State does not fulfil the requirements under one or both of these criteria"—
the ratio criteria, which we have debated—
the Commission shall prepare a report.


That is pretty fierce in itself.
The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors".
That is the starting point. Then, as my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) pointed out, if the nation state fails to do certain things, the Commission can publish the report. Under paragraph 12, it is held in terrorem over the head of the member state.
No member state—least of all a member state like Britain, which will probably have a balance of payments problem and whose currency will be rather wobbly—will want to incur such international opprobrium, with all the attendant effects on the international markets, the pound or interest rates. The report would be like an IMF report—the right hon. Member for Mid-Sussex can tease me about that again if he likes. We know the effect that the IMF can have on a nation's status in the currency and financial markets.
Paragraph 4 of chapter 4 states:
In the second stage, Member States shall endeavour to avoid excessive government deficits.
The Financial Secretary does not even look up. The word used is "endeavour", but the whole area encompasses pressure on the member state to ensure that it avoids excessive deficits.

Mr. Rowlands: Before my right hon. Friend deals with paragraph 4 of article 109e, let us consider the second part of paragraph 3, which lists a series of articles that will apply from the beginning of stage 3. At the beginning of his speech, my right hon. Friend mentioned the formula used by the Law Officers and the Foreign Secretary. They identified the articles and amendments that were necessary and those which were only desirable. They said that one category created rights and obligations. Is it my right hon. Friend's understanding that some of the articles listed in the second part of paragraph 3, relating to stage 3, are not necessary and, therefore, do not create rights and obligations at this stage and are thus only desirable? If so, could not some easily be knocked out of the Bill without preventing ratification?

Mr. Davies: That follows on from what I have tried to argue. The second part of paragraph 3 deals with articles which will apply from the beginning of stage 3. It could be knocked out without affecting ratification of the treaty. That must be right and I am sure that the Financial Secretary agrees.

Mr. Cash: In the same spirit of scrutiny, does the right hon. Gentleman agree that it would be as well to remember that we are talking about a legal requirement? The requirement for member states to "endeavour" to avoid excessive Government deficits under paragraph 4 of article 190e is, to all intents and purposes, no different from the requirement under the so-called opt-out in article 104c, of which much has been made, that member states "shall" avoid excessive Government deficits. The important point is that, if member states do not avoid such deficits, they will be up before the beak.

Mr. Davies: That is right. As the hon. Gentleman knows, the phrase "shall endeavour to avoid" appears in

many contractual documents: "the party of the third part shall endeavour to avoid". If it can be shown that the party of the third part has not endeavoured to avoid, damages, fines, or whatever the document specifies, follow. However, we shall endeavour. Every day, the Financial Secretary "endeavours to avoid" at the Treasury. We heard that the Belgian Government had been endeavouring to avoid, although they did not manage it and lost a Prime Minister. They will try again because they will have to. Everyone is endeavouring to avoid.
I disagree with my hon. Friend the Member for Oxford, East, who appears to think that there is flexibility and that we do not have to worry. Everyone will be endeavouring to avoid and will endeavour to reach the 3 per cent. target as fast as they can, especially, and paradoxically, as the economic situation in Europe gets worse. It will drive member states towards economic and monetary union faster because that will be regarded as the panacea—get there quickly and everything will be all right. I suspect that it will work in a different direction.
The Financial Secretary is endeavouring. There will be another Red Book next year and he will ensure that the Commission does not come down on him like a ton of bricks. He will be a good boy and do the best he can.

Mr. Legg: I was interested in the right hon. Gentleman's comments about nation states in Europe wishing to go faster, even though economic circumstances were against them. I recently had a meeting with Pedro Perez, the socialist Economics Minister of Spain, where there is an unemployment rate of 20 per cent. He said that Spain had a convergence programme to get its public sector borrowing requirement down to 1 per cent. He saw the solution to Spain's unemployment problem as the driving down of the deficit. The right hon. Gentleman has hit on a very good point.

Mr. Davies: I wish to move on, but I agree that Governments will try to reach the 3 per cent. target as quickly as they can because they will be under pressure. Now that the ERM has failed to deliver economic and monetary union, because it could not traverse the chasm in one leap—it tried to do it in two leaps but fell down—there will be pressure to arrive at a common currency in another way, like a big bang, and everyone will have to converge as fast as they can. I think that that is what will happen, but it is a matter of opinion.
I shall now move on.

Mr. Hain: In support of that important point, may I remind my right hon. Friend of the statement by the Economics Commissioner, Mr. Henning Christophersen? My right hon. Friend may recall that a few weeks ago there was much speculation about the "impossibilist" convergence criteria. Countries were finding them difficult to meet; in fact, virtually no country was meeting them. Mr. Christophersen quickly jumped in to say that that did not mean that Europe was not still on course:
We are not talking about a delay in the general process. We are talking about a common time frame.
That was an important confirmation from the EC Commissioner.

Mr. Livingstone: And on the same point, does my right hon. Friend—

The Second Deputy Chairman: Order. We cannot have one intervention upon another.

Mr. Davies: I agree with my hon. Friend the Member for Neath (Mr. Hain). I, too, saw Mr. Christophersen's statement. It was rather a diplomatic statement, because I gather that different views were expressed at the meeting and the Commissioner may have been trying to straddle those different views. I believe that in general there will be an effort to get the process over with as quickly as possible.

Mr. Livingstone: One the same point, in view of what the hon. Member for Milton Keynes, South-West (Mr. Legg) has just said about the attitude of the Spanish Government, does not a clearer idea of what is likely to happen emerge from the first stage of the French election results? The French Government, also misguided, have striven to prepare the French economy for the criteria and have followed every stricture on monetary policy that comes out of Brussels, to try to make France the premier nation in terms of preparation for monetary union. The result has been the destruction of popular support for that Government and their elimination from Parliament. The results have been devastating, the worst showing by any French Government this century, and that is because that Government have complied so faithfully with the criteria. After the best part of a decade and a half in the first stage of the transition towards monetary union—that is what the exchange rate mechanism was all about—popular support has been destroyed, because the scale oaf f pain involved is not sustainable in a democracy.

Mr. Davies: It will be interesting to see what happens in France and whether the Gaullists will try to break the orthodoxy. I should be surprised if they did. I think that the Governments of Europe are all locked into it and that after a while they will not worry too much about their people. Perhaps I am digressing now, but I believe that there is a kind of political class that likes to latch on to that orthodoxy. I should be surprised if the Gaullists did otherwise, but I may be wrong.
May I now move on?

Mr. Gould: May I delay my right hon. Friend for a moment longer? Bearing in mind the powerful point made by the hon. Member for Milton Keynes, South-West about the Spanish experience, the even more powerful point made by my hon. Friend the Member for Brent, East (Mr. Livingstone) about the fate of the French socialist Government, and the fact that one of the few positive arguments for supporting the treaty ever advanced by our hon. Friends is that we must maintain and establish solidarity with our European socialist colleagues, does not my right hon. Friend think that it would be advisable for our hon. Friends at least to note the fate of the French socialist Government and the likely fate of the Spanish socialist Government? Even in terms of the most cynical electoral calculation, would not it be prudent to pause for a moment before blundering forward along the same course?

Mr. Davies: I agree. Indeed, about 30 of us recently went through the Aye Lobby to ask for a pause, but unfortunately I do not know where the rest of the Labour party was. Perhaps other Labour Members were in bed, or perhaps they did not want to pause—that must be the conclusion to draw. I agree that what my hon. Friend has described is a serious matter, not only for the so-called democratic left in Europe but for orthodox parties of the

right, too. We are taking economics out of politics, which is a dangerous thing to do. No doubt we can return to that debate.
Article 109e (5) which deals with the Bank of England, says:
During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank in accordance with Article 108.
That is a legal obligation. The second stage starts on 1 January 1994 and goes on and on until we reach a third stage. Presumably, if we do not reach a third stage, we shall remain in the second stage.
My hon. Friend the Member for Oxford, East questioned the Financial Secretry once or twice on this matter and the Financial Secretary was not entirely clear about it. I think that he said, and I have heard other Ministers say, that we do not have to do anything about the Bank of England until the third stage—until we have opted in, if we decide to opt in. That is as it may be, but something has to be done by a member state, as my hon. Friend the Member for Oxford, East pointed out, to
start the process leading to the independence of its central bank".
What is meant by the
independence of its central bank
is that the statute governing that central bank must be as nearly identical as possible to the statute governing the European central bank, which is also independent. It makes sense that they should be mirror images, like the German länder banks and the Bundesbank. The process has to be started.
The Bank of England Act 1946 did not nationalise the Bank of England. I heard Lord Jay making a number of speeches explaining that Act quite clearly. It merely enabled the Treasury to issue directives to compel the Bank of England to obey. Apart from once, over prices and incomes policy, when those at the Bank went off and paid themselves a lot of money, I do not think that the Bank has ever been threatened or issued with a directive. We were contemplating one in those days, but, in the end, it did not have to happen. So now there are directives held in reserve. If the Governor refuses to put on his top hat, get in his car and come down to No. 10 Downing street and give his advice on interest rates, a directive will be issued.
The Bank of England Act will have to be substantially changed or repealed. The power to issue directives against the Bank of England will have to go. I should be surprised if that could be done by order. I do not see how it can be done except by repealing the Act.

Mr. Dorrell: rose—

Mr. Davies: I see that the Financial Secretary is ready to intervene. How does he envisage starting the process, which he will have to do in stage 2?

Mr. Dorrell: This country has no obligation under the treaty to move to stage 3. That is a choice which we have left until later. Furthermore, clause 2 provides that we would not be able to exercise our option of moving to stage 2 without a further piece of legislation going through the House. Clearly, as part of that legislative process, we should have to provide for an independent central bank which satisfied the terms of the treaty—if we chose to go to a single currency. We should have to provide arrangements for the Bank of England which satisfied the treaty, if we chose to exercise our option under our protocol. But if we choose not to exercise our option in


order to join a single currency, we are under no obligation under the treaty to change the arrangements for the Bank of England.

Mr. Davies: Is the Financial Secretary saying that he does not start the process under stage 2 until just before the Queen signs the Act?

Mr. Cash: It is idiotic.

Mr. Dorrell: My hon. Friend the Member for Stafford (Mr. Cash) says that it is idiotic. As a statute is required to go through the House to make the changes to the Bank of England that are necessary to satisfy the requirements of the treaty, it seems to me not unreasonable to assume that the House would wish to consider the arrangements for the Bank of England at the same time as it made the choice whether to adopt a single currency. It would put the two things together. [Interruption.] With respect to my hon. Friend the Member for Stafford, it is not beyond the wit of man to fix a date on which a measure comes into force somewhat after the date of Royal Assent.

Mr. Davies: The Government will do the two at more or less the same time. We have not been told that before, so now we can move on. Of course, it means that the Government do not believe in an independent Bank of England. The present British set-up is excellent; the Governor gives his advice, and the Prime Minister and Chancellor decide. The French have had a similar system for years, although I do not think that they bother to consult the Governor, who is told of the decision, whatever it is, after it has been taken. By that means, the French have done well—better than the Germans—on inflation. We note with interest that the Government are not rushing to create the great independent central bank, which we shall have to accept if we go for the idea.

Mr. Gould: My right hon. Friend is perhaps being too generous to the Financial Secretary, who said that no step need be taken towards the establishment of an independent central bank unless and until the preconditions for the implementation of stage 3 are acted on. Yet that is contradicted by the words that my right hon. Friend quoted. They provide that under stage 2—the question whether we ever get to stage 3 is irrelevant—each member state shall—it is a mandatory use of language—start the process, leading to the establishment of the independent central bank. So my right hon. Friend was right to ask what steps the Government contemplate to fulfil that obligation. It has nothing to do with stage 3. We may never reach that stage, but that mandatory obligation would be in force as we proceeded through stage 2.

Mr. Davies: I am prepared to give the Financial Secretary the benefit of the doubt. I think he was saying that, for a magical moment, we shall be in stage 2, and then—whoosh—into stage 3. If he was not saying that, my hon. Friend the Member for Dagenham (Mr. Gould) is right.

Mr. Rowlands: If the Financial Secretary believes that this is the right process—that we can legislate for stage 3 when we come to the second piece of legislation—why are we putting so many articles into our domestic legislation now? If that formula is available in that case, why is it not available for other articles in stage 3, so that we can legislate for that stage when we decide to go into it?

Mr. Davies: My hon. Friend makes a good point, which has not so far been answered, except that what the Government are doing is tidy and makes the draftsmen happy. Of course, doing it this way avoids a terrible row, since our European colleagues will not have to accuse us of dragging our feet.

Mr. Legg: Should there be a prolonged period in stage 2 for the United Kingdom, and we have the provision stating that we shall start the process, will the decision to start the process be wholly in our hands? If Britain does not take that step in accordance with the treaty, other parties may apply pressure to get that part of the treaty enforced.

Mr. Davies: From a practical point of view, the answer is yes, something will have to be done. But it will all be done after the treaty has been ratified by joining the ERM—a subject to which I shall return.

Mr. Andrew Smith: The Government want to face in both directions simultaneously. They want to be able to say that the second stage can stretch ahead indefinitely, with the rest of Europe perhaps in stage 3, just as our proceedings today are actually taking place on Wednesday in parliamentary terms, even though Thursday Committees may soon start sitting. On the other hand, we must put every condition in place so that the Government can satisfy other European countries—and some of the Financial Secretary's other friends—that we will be in a position to satisfy the requirements of the treaty. The Government do not want to say which course of action they will take.

Mr. Davies: I will not be tempted too far. All the geniuses are on the Government Front Bench.
I shall refer to another institution. The number of institutions established by the European Community is amazing. There are institutions for all sorts of purposes. Article 109f provides for the European Monetary Institute. The Government's involvement must start at the beginning. The institution must be set up and the Government must be part of it immediately at the start of stage 2—which is 1 January, if everything goes all right. Basically, the EMI will be the shadow central bank. It will take over from the Committee of Governors, which already exists.
The process is clear: we have an obligation under the treaty, and we will obviously take a full part in the EMI. The statute of the EMI is set out in page 104 of the treaty. There are only one or two points to which I should refer. Paragraph 1.3 in article 1 of the protocol says:
The Committee of Governors and the European Monetary Co-operation Fund (EMCF) shall be dissolved. All assets and liabilities of the EMCF shall pass automatically to the EMI.
I do not know what the European monetary co-operation fund is. Perhaps the Financial Secretary could tell us what assets the fund has at present, what its liabilities are and what percentage of the assets—or perhaps more importantly, the liabilities—Her Majesty's Government own or for which money is owed. All the assets and liabilities will go to the EMI. Presumably, the fund passes out to the joint ownership of the British Government to some extent and comes under the


ownership of the EMI, which then becomes the central bank. I hope that the Financial Secretary can clarify that matter.
In article 2, we are told the objectives of the EMI:
The EMI shall contribute to the realization of the conditions necessary for the transition to the third stage of Economic and Monetary Union".
It is not any old economic and monetary union, but the one provided for in the treaty. The Financial Secretary does not know whether we want to join that union.
An institution will be set up, perhaps on 1 January 1994. Its job will be to prepare the way for the central bank. The British Government will have to play their full part. Whatever money or effort it costs, and whether the Financial Secretary likes it or not, the Government will be part of an enterprise which will drive the countries of Europe towards a central bank, a single currency and economic and monetary union.
The article says that the EMI will make
preparations required for the establishment of the European System of Central Banks (ESCB), and for the conduct of a single monetary policy"—
the Government will be playing a full part at the heart of the institution in Europe—
and the creation of a single currency in the third stage.
The Financial Secretary or the governors will also oversee the development of the ecu, which will presumably be the single currency.

Mr. Rowlands: The hard ecu.

Mr. Davies: We lost the hard ecu somewhere along the way. I do not know what happened to it. Given the balance of payments deficit and the PSBR, we cannot talk about hard currencies. So to propose a hard ecu is perhaps not a good idea for the Government.

Mr. Legg: A marshmallow ecu.

Mr. Davies: A marshmallow ecu, the hon. Gentleman says.
Article 3 of the protocol says:
The EMI shall act in accordance with the objectives and principles stated in Article 2 of the Statute of the ESCB.
Then we are told what its primary tasks will be. I will not go through them all.

Mr. Hain: My right hon. Friend mentioned that the EMI would have to act in accordance with the objectives and principles stated in article 2 of the ESCB statute. If my right hon. Friend turns to page 90, he will find that the treaty lays down that the EMI will be directed to achieve price stability in a determined, laser-like fashion, in accordance with article 3a. So we have come full circle. Although supposedly we are not yet in stage 3 and the House will take a free decision to enter it, in practice we are lining ourselves up lock, stock and barrel to worship at the shrine of price stability at all costs and without prejudice to anything else.

Mr. Davies: That is right. As I said at the beginning of my speech, price stability appears in paragraph 2 of the transitional provisions. It appears right through the treaty. As the Financial Secretary accepted in another debate, price stability is close to zero inflation, if not zero inflation. That is what it is all about. We are told in paragraph 4.1 of the protocol that the EMI will
normally be consulted by the national monetary authorities before they take decisions on the course of monetary policy in the context of the common framework for ex ante co-ordination.

That means that, even under stage 2, the British Government will no longer be free to set their own monetary targets and determine how they control monetary policy. The EMI will be able to come to the Government and say, "We want to look at your monetary targets. How do you do it?" The job of the EMI is to create a common monetary policy for when stage 3 arrives. It will be ready to take over with the M3, M4, M10 or whatever totem pole of monetarism is in fashion when we reach the first stage of EMU.

Mr. Spearing: My right hon. Friend will agree with me that we have dealt with profound issues in the last two debates. Our problem is in describing them to those who are not habitually interested in international banking matters. Does he agree that what he has just described amounts to saying that, in stage 3, we are invited to enter a series of financial and economic straitjackets? However, in stage 2 we are not in the jackets, but we have to act as if we are.
Therefore, when we reach stage 2, we shall be told by whatever Government are in power that we can easily move to stage 3, because we shall not have to act any differently. That is perhaps a rather crude analogy. Is it not approximately the position in which the treaty and the matters referred to by my hon. Friend the Member for Neath (Mr. Hain) put us? Therefore, when the time comes for choice, it will be easier superficially for the Government or any Administration to say that we should enter stage 3 so that we can influence future events.

Mr. Davies: I quoted the last sentence of paragraph 4.1 of the protocol, but, as my hon. Friend has said, some of the sentences are stronger and bolder. One of them talks about strengthening
the co-ordination of the monetary policies of the Member States with the aim of ensuring price stability;
Another states that regular consultations must be held on
the use of monetary policy instruments".
I would not want to stretch the point, but that is getting pretty close to interest rates which are part of monetary control. Towards the end, there is a requirement to
supervise the technical preparation of ECU bank notes".
I do not know whether that means painting the name on them, but perhaps in Birmingham where they used to print pound notes they will be printing ecus.
The British Government are tied in by treaty obligations to do all those things, yet they have to pretend that, one day in the distant future, a pristine, unfettered, uncluttered decision will be taken to go in or to stay out. The Government are not credible when they say that; we are in pretty deep, and if we do not have the courage to cut this Gordian knot and say that it is all nonsense, we shall not have the courage to do it in five or six years' time, when we are all sitting nicely on our EMIs and other institutions, rushing back and forth from Brussels for splendid meetings. I do not believe that it will happen like that.

Mr. Chisholm: Is it not also the case that all the references to monetary policy must include exchange rate policy? Does not that give the lie to the idea that Ministers are peddling, in order to gain the votes of Conservative Back Benchers, that they will retain the freedom to set the exchange rate during stage 2? Is it not the case that we shall not be able to have a floating exchange rate and that that will be controlled, or at least influenced, by the EMI?

Mr. Davies: Indeed. I shall return to the interesting subject of the ERM. My hon. Friend is quite right.
Article 6.1n, on the European Monetary Institute, talks about a Council regulation 1969/88
establishing a single facility providing medium-term financial assistance for Member States' balance of payments.
I see the Financial Secretary's eyes lighting up at the chance to get some money out of the Commission to help to cover the Government's huge balance of payments deficit. It was £17 billion this year, and if we have the recovery that the Government want, it will be £20 billion and will continue to rise.
It sounds a bit like the IMF, which was formed to help member states with balance of payments problems. That was its primary task, although I do not know whether that is still the case.
The EMI and the Commission will help out member states with their balance of payments problems, but there will be no free lunch. There will be a multiannual programme which will set out where the cuts should be made and how many hospitals and schools should be closed and whether there should be cuts in social security and welfare payments, which is what they are trying to do in Belgium and Germany, and facing some problems. Taxes will not be cut, as that would not be right, but it will be possible to cut public expenditure. If we want help with the balance of payments, we are going to have to pay the Danegeld.
Article 7 refers rather innocuously to other tasks:
Once a year, the EMI shall address a report"—
we shall have plenty of institutions and reports going back and forth all the time—
to the Council on the state of the preparations for the third stage.
That means the state of the preparations of member states, I assume, for the third stage. The report will go to the Council and it will say that the British Government have done nothing at all, apart from issuing a funny little book with a red cover and calling it a multiannual report. It will say that the Financial Secretary is sitting on his backside in the Treasury, doing nothing. And there will be terrible trouble.
But that will not happen, will it? Her Majesty's Treasury is a very law-abiding, responsible and proficient organisation, and we shall be doing our best at the heart of Europe, not like those Italians, dragging their feet, and those terrible Spaniards. We are northern people, Anglo-Saxons, we abide by the law, we do things right, our word is our bond.

Mr. Enright: We are not all Anglo-Saxons; some are Celts.

Mr. Davies: Yes, indeed, some of us are Celts. I was being respectful to my English colleagues who are in a majority in this House.
Nevertheless, we are Anglo-Saxon people, and we have those qualities that Anglo-Saxons are supposed to have, and that means that we will abide by the law. So we will be preparing it, working at it, doing all the things, getting the convergence going; and the report, no doubt, will be quite a good one in that sense. We will get lots of marks for effort. Maybe we will not always get our sums right, and sometimes the figures will be far out, say, on the public sector borrowing requirement, but at least we will be working hard at it, and that again will be the reality.
Article 7 goes on to say,
These reports shall include an assessment of the progress towards convergence…and cover in particular the adaptation of monetary policy instruments"—
back to those monetary policy instruments again; they love them—
and the preparation of the procedures necessary for carrying out a single monetary policy in the third stage"—
so there will have to be preparation of procedures ready for the third stage—
as well as the statutory requirement to be fulfilled for national central banks"—
oh yes, missed that—
as well as the statutory requirements to be fulfilled for national central banks to become an integral part of the ESCB.
The Financial Secretary has not seen that, has he? It is on page 106. He has it.

Mr. Cash: The right hon. Gentleman will recall that section 4 of the Bank of England Act 1946 is the exclusive basis upon which the Chancellor of the Exchequer and therefore the voters of this country are able to give directions to the Governor of the Bank of England. The provision that the hon. Gentleman has just mentioned, in article 7.1 and article 8 of the protocol—which I do not want to pre-empt but which deals with whether the Governor of the Bank of England, in that EMI, can seek or take instructions from the Treasury—blows the whole thing wide open. Not only have they to set up this bank, but they will have to repeal section 4 to make sense of it.

Mr. Davies: I do not know about that, but certainly article 8 mentions—it is the same article about independence as we find in the central bank protocol—

Mr. Dorrell: I think that there is a fundamental misunderstanding. The first sentence of article 8 reads:
The members of the Council of the EMI"—
the national central bank governors—
who are the representatives of their institutions shall, with respect to their activities, act according [to] their own responsibilities.
That means according to their existing responsibilities as defined by their existing national law. [HON. MEMBERS: "Read on."] The article then goes on:
In exercising the powers and performing the tasks and duties conferred upon them by this Treaty and this Statute, the Council of the EMI may not seek or take any instructions from Community institutions or bodies or governments of Member States.
The key point about the second sentence of article 8 is that it is the Council of the EMI as an institution which is not allowed to take instructions. The members of the Council, acting as individual members of the Council, do so on their own responsibility. [HON. MEMBERS: "Come on."] That is what that article means. It is no good hon. Members saying, "Come on"; that is the meaning of the article. I concede that the article is not the model of clarity of other articles in the treaty, which is why I intervened at an early stage to enable the House to proceed on the basis of a correct understanding of it.

Mr. Davies: I paid the Financial Secretary a compliment earlier this morning, saying that—unlike the Minister of State, Foreign Office—he does not rush in to give legal opinions on the hoof. [Interruption.] I hope that he did not ask the legal advisers at the Foreign Office—or did he? I hope that he did not ask the Treasury Solicitor, either.

Mr. Gould: I hope that I shall not embarrass the Financial Secretary, or anyone else, by revealing that, a long time ago, I taught him international and constitutional law. I disclaim all responsibility for what he has just said.

Mr. Davies: Some of us do not consider international and constitutional law to be law. As far as some of us are concerned, looking at the words is the law.
The Financial Secretary has an acute mind, and as he read on he started to wobble and to worry a bit. For a start, the article is headed "Independence", and a judge would be quite impressed with that.

Mr. Spearing: Does my right hon. Friend agree that it will not be international and constitutional law, but law as interpreted by the European Court of Justice, in respect of the treaty, which is quite a different matter? Is it not probable that that court may say that it is true that one must not influence that body, as a body, and that that also means that one must not try to influence its members, because in so doing one is trying to influence the body. Although I would not say that that is my interpretation, or that of the court, surely it is just as logical and likely as the interpretation given by the Financial Secretary.

Mr. Davies: The way that I read the article is that, when exercising their duties, whoever sits on the Council—presumably it will be the Governor of the Bank of England—will be subject to the Bank of England Act 1946. However, in exercising duties as a member of the EMI, the Governor must not take any instructions from anyone.

Mr. Dorrell: indicated dissent.

Mr. Davies: The Financial Secretary shakes his head, but that is a perfectly reasonable interpretation of what may not be an easy article. I suggest that, within the context of both the EMI and the central bank, and the thrust of the independence of those institutions, the European Court might he more likely to accept my interpretation than that of the Financial Secretary.

Mr. Dorrell: I concede that, even if I had been privy to the advice of my former tutor, I think that I would have had some difficulty in interpreting the article on my own. The interpretation that I placed on the two sentences that I quoted is given extra authority when I tell the House that the first sentence of the article is lifted directly from the present terms of reference of the Committee of Governors of the central banks. As far as I know, no one argues that, when acting as members of that committee, they are required to be independent of their national accountability mechanisms.

Mr. Davies: Maybe not—perhaps it is a looser institution and the article is referring to something more precise, but it is still headed "Independence". However I do not want to labour the point.

Mr. Legg: In saying that, because certain phraseology is taken from previous legislation and treaties, it must have the same interpretation as before, the Treasury has misinterpreted some areas of the treaty. The Government Front-Bench spokesman seemed to miss the point: that the phrases have been lifted and put into the Maastricht treaty in a different context, which adds a different interpretation and weight to the words involved.

Mr. Davies: I am sure that that is right.

Mr. Bill Walker: The right hon. Gentleman might cast his eye a little further down the page. The presidency of the EMI is a full-time job for three years. That must have an impact on the decisions of the EMI.

Mr. Davies: As I read the provision, there are different spheres of responsibility. It may be that the two circles will occasionally cross, creating something of a problem. So far as I can see, in the exercise of the duties in respect of the EMI, which may very well be different from those relating to the Bank of England, the Governor will be independent.

Mr. Hain: I should like to direct my right hon. Friend's attention to two sentences that the Financial Secretary was very reluctant to read out. These are identical to the wording of article 7 on page 91, which specifically details the independence criteria governing the European central bank. I should think that the court will take note of that.

Mr. Davies: The Financial Secretary shakes his head again, but my reading is the same as that of my hon. Friend.
Article 23 provides—hooray, hooray—for the liquidation of the EMI. Unfortunately, the institution appears again in another form—the more powerful central bank. I am sorry to come back to the question of assets and liabilities, but I must do so. All the assets and liabilities of the EMI will automatically pass to the central bank. They started with the Co-ordinating Committee of European Governors, then went to the EMI, and are now to go to the European central bank. Article 29 of the bank's statute deals with the capital subscription—the weighting of voting of shareholders. I suppose that one can subscribe to things other than shares.
I do not understand this article, and I should not criticise the Financial Secretary for failing to understand it. It says:
Each national central bank shall be assigned a weighting in this key which shall be equal to the sum of:
—50 per cent. of the share of its respective Member State in the population of the Community in the penultimate year preceding the establishment if the ESCB:
—50 per cent. of the share of its respective Member State in the gross domestic product at market prices of the Community as recorded in the last five years preceding the penultimate year before the establishment of the ESCB".
As if that were not enough, the percentages have to be rounded up to the nearest multiple of 0·05 percentage points. That is an exam question in itself.
Presumably some of the value of these assets that have been transferred twice is ours. How does this work out in terms of ownership? Presumably the bank is the owner. There is nothing in this provision about 24 votes for the larger states and 11 votes for the smaller states. There is nothing about weighted voting. Perhaps the Financial Secretary, when he intervenes, will try to explain the meaning of article 29. What will the United Kingdom own, if we own anything, in the European central bank? Will it have those assets which belonged to it initially, passed through all the institutions? Will we have one third, one tenth, one fifth of the assets?

Mr. Rowlands: Article 29 has been puzzling me for some time. Unlike our vote on the Council, which is a simple matter to work out, it is almost impossible to work out the article 29 formula, which changes according to one's economic performance. Will the Financial Secretary tell us what percentage of the total number of members or


votes on the new ECB—were we establishing it today—we would have based on our current economic and GDP performance?

9 am

Mr. Davies: I am sure that the Financial Secretary has heard the question.
Article 109f.2 states that the EMI shall co-ordinate monetary policy, aim at price stability and monitor the function of the EMS. The article also states:
For the preparation of the third stage, the EMI shall:—prepare the instruments
of monetary policy.
Paragraph 4 of the article on page 26 states:
The EMI, acting by a majority of two thirds of the members of its Council, may
carry out three functions. Presumably, on that basis, each member has one vote.

Mr. Livingstone: Are not the votes weighted to reflect the GDP? Per head of population, the German vote will be worth twice the vote of Great Britain.

Mr. Davies: Even Luxembourg may not do too badly in terms of number of votes.
Paragraph 4 states:
The EMI, acting by a majority of two thirds of the members of its Council, may:
—formulate opinions or recommendations on the overall orientation of monetary policy"—
we have had that policy before, but not in that form—
and exchange rate policy".
Another sphere has been opened up. We are dealing not only with monetary policy, but with exchange rate policy—I suppose that we cannot have one without the other.
The EMI must act on a majority of two thirds. I do not know whether the Chancellor of the Exchequer will be able to sit on the Governor to ensure that he votes, or whether the article on independence will be applied. I do not know where the references to the exchange rate policy leave a British Government who are not really part of the ERM. While we are, presumably, part of the EMS, we are not part of the ERM. The monetary system is nonsense; it is the ERM that is important.

Mr. Dorrell: The easiest way of responding to the right hon. Gentleman is to refer him to article 3 of the protocol of the EMI. It clearly states:
The EMI shall carry out the tasks and functions conferred upon it by the Treaty and this Statute without prejudice to the responsibility of the competent authorities for the conduct of the monetary policy within the respective Member States.
Monetary responsibility remains the responsibility of the member states during the time that the EMI is operating.

Mr. Davies: The Chancellor will be able to sit on the Governor and tell him what to do.

Mr. Gould: Article 109j provides that the duties laid on the EMI by the statute—the words quoted by the Financial Secretary—include the responsibilities of monitoring performance on exchange rates and monetary matters as laid down by our membership of the ERM.

Mr. Davies: Even if the Governor puts up his hand to vote in the way that the Chancellor wants, if two thirds

vote the other way, we shall be outvoted. It is qualified majority voting and they can formulate opinions and make recommendations. It states:
The EMI, acting by a majority of two thirds of the…members may…formulate…recommendations on the overall orientation of monetary policy and exchange rate policy as well as on related measures in each Member State.
It will be able to pronounce on exchange rate policy on a two thirds vote, and that might be contrary to the wishes of the Governor who would, according to the Financial Secretary, take his instructions from the Chancellor.

Sir Russell Johnston: Does the right hon. Gentleman think that it would be rather good if we needed a two thirds majority in this country in order to make such decisions?

Mr. Davies: What decisions where?

Sir Russell Johnston: The decisions that the right hon. Gentleman has just read out. A two thirds majority is required to set in train those various propositions. He criticised that, and I said that it would be rather nice if that was necessary in this country.

Mr. Davies: Some measures need a two-thirds majority, and others need a simple majority. One cannot give a blanket answer about that. I am not criticising it: I am just reading it out. Euro-enthusiasts have very thin skin. When one reads out the treaty, they say that one is criticising it, and when it is read out again, they say, "Well, it doesn't mean that at all." When it is read out again, they say that it is not there at all. It is like the sub-atomic particles, quarks or whatever they are called, that are seen only when one looks for them. Apparently they are all over this treaty.

Mr. Roger Knapman: Does the right hon. Gentleman agree that the best majority would be by a referendum on this whole wretched treaty? Bearing in mind that, tonight and every night, the Liberals will maintain the balance of power, if they really want a referendum they could obtain one.

Mr. Davies: That is a good point.

Mr. Livingstone: Has my right hon. Friend seen the statement reported on the tapes, that the Liberal democrats have decided to make progress on this? They are outraged by the time that it is taking, and have given undertakings to the Tory Whips that the votes will be delivered day by day to ensure that the treaty is carried? Those are the people who will hawk themselves around Newbury saying that they are there to defend local people when they are propping up the Government and the treaty.

Mr. Davies: That does not surprise me at all. I have been in Parliament longer than my hon. Friend, and I know what to expect from the Liberal party in these matters.
Article 109h deals with balance of payments, and I suppose that it gives some hope to the Financial Secretary of some money to sort out the huge balance of payments deficit. Obviously, strings will be attached. Article 109j deals with convergence conditions. Curiously—or perhaps not curiously—those conditions are set out in the part that deals with the second stage. I suppose that that has to be done like that, so that one knows what they are to get to


the third stage. I shall not ask the Financial Secretary for a legal opinion, because I do not think that I am on a good legal point.
I am a little worried that all the convergence criteria are in a second stage, which imposes on us a treaty obligation. I do not want to press that too far, but all four criteria are in the second stage, which says that we must do this and that. There seems to be an obligation on us to achieve a high degree of price stability in stage 2. Is there such an obligation? [HON. MEMBERS: "Yes."] The people's court says yes. I do not know what the lawyers will say.

Mr. Dorrell: One of the earlier, over-arching articles commits us to the achievement of price stability as the condition precedent—in the Government's view and based on our experience over a long period—to the achievement of the growth and social objectives that we all share.

Mr. Davies: I know that the Financial Secretary is keen on price stability. That is a good thing. When he began answering, he gave me the impression that there was a treaty obligation.

Mr. Dorrell: Article 2, which has been much quoted in our discussions, states:
The Community shall have as its task…by implementing the common policies or activities referred to in Articles 3 and 3a, to promote throughout the Community…sustainable and non-inflationary growth".

Mr. Davies: That is so, but the Financial Secretary is missing his best point, which is not the flabby language of article 2 but the precise language of article 109j. The Financial Secretary was right the first time. Perhaps he is a little worried now about what he said.

Mr. Dorrell: indicated dissent.

Mr. Davies: He is not. We will move on to the article's other provisions, which include
the achievement of a high degree of price stability".
That is a good thing, but its achievement is an obligation. Yes? No?

Mr. Dorrell: I quoted where there is an obligation. In the context of article 109j—as I said when I addressed the House in January—the
achievement of a high degree of price stability
is one of the convergence criteria that are not precise treaty obligations. They are conditions precedent on the establishment of a single currency. They are the trap through which a candidate member of the single currency has to pass before it is entitled to join under the terms of the treaty.

Mr. Davies: I do not deny that, but perhaps the Financial Secretary's initial reaction was the better one. Paragraph 1 states also that the report that the EMI make
shall also examine the achievement of a high degree of sustainable convergence"—
we had the list before
fulfilment by each Member State of the following criteria".
That certainly imposes an obligation to fulful certain criteria in stage 2.

Mr. Rowlands: Presumably, although there is an obligation of some kind on member states, the Government and the Treasury would tender almost a nil return to the Commission and the EMI, because none of those conditions should apply or be enforced unless we

decide to go to stage 3. Is the alternative interpretation of the paragraph that we will not have such an opportunity, but will be reported on whether we like it or not?

Mr. Davies: It applies anyway. Whether or not we ever decide to go to a single currency, stage 2 places on the British Government the obligation to do everything they can to achieve zero inflation or something close to it.

Mr. Dorrell: No.

Mr. Davies: Is the Financial Secretary saying that I am wrong?

Mr. Dorrell: I heard the right hon. Gentleman say that article 109j places such an obligation on the United Kingdom. That statement was incorrect, which is why I said, "No."

Mr. Davies: Then on whom does it place that obligation? Nobody?

Hon. Members: Answer.

Mr. Dorrell: I was waiting for the right hon. Gentleman to resume his place, to—

Mr. Davies: Consult the Foreign Secretary's former tutor?

Mr. Dorrell: The right hon. Gentleman asked on whom the obligation in article 109j would be imposed. The obligation is contained in the first sentence of paragraph 1:
The Commission and the EMI shall report to the Council on the progress made in the fulfilment by the Member States of their obligations regarding the achievement of economic and monetary union.
Those obligations are not imposed by the article but arise way outside it. Article 109j is concerned with the obligation placed on the Commission and the EMI to report to the Council on the achievement or otherwise of convergence criteria by candidate members of the single currency.

Mr. Davies: It is a bit like the article on independence. Article 109j states:
The Commission and the EMI shall report to the Council on the progress made in the fulfilment by the Member States of their obligations".
"Their" does not refer to the Commission and the EMI, or to the Council; it refers to the member states. The article goes on:
regarding the achievement of economic and monetary union.
Those obligations are imposed on the member states by treaty under stage 2.

Mr. Dorrell: rose—

Mr. Davies: I am sorry; I will not give way to the Financial Secretary again. Perhaps he should get the Attorney-General or someone to give him some better advice.
The criteria are
the achievement of a high degree of price stability…the sustainability of the government financial position; this will be apparent from having achieved a budgetary position without a deficit that is excessive as determined in accordance with Article 104c".
That means getting the deficit down to 3 per cent. It doers not mean anything else: that is the obligation imposed on


us. My hon. Friend the Member for Oxford, East (Mr. Smith) can wriggle and hope for flexibility as much as he likes—I do not mean that in a pejorative sense.
This is the criterion that I was really coming to:
the observance of the normal fluctuation margins provided for by the Exchange Rate Mechanism of the European Monetary System, for at least two years, without devaluing against the currency of any other Member State".
I was a bit dubious when I heard about the opinion given to Conservative Members by someone of the name of Howe; I have not read it, but it sounded a bit political, like the judgments of the European Court. Having read this, however, I am beginning to have second thoughts. Perhaps I did the right hon. Member for Mid-Sussex (Mr. Renton) an injustice.

Mr. Betts: Paragraph 1 of article 109j merely refers to the production of reports. It is paragraph 2 that deals with their assessment, and may start to lead on to obligations for Britain. Paragraph 1 of the protocol on the opt-out, further back in the treaty, specifically says:
The United Kingdom shall notify the Council whether it intends to move to the third stage before the Council makes its assessment under article 109j(2) of this Treaty".
There seem to be no obligations on the United Kingdom under article 109j, bearing in mind that protocol.

Mr. Davies: Article 109j places an obligation on the Commission and the EMI, quite rightly, to make a report to the Council; but that report is about the fulfilment of the member states' obligation, which is to meet those four criteria.

Mr. Legg: We are facing a misunderstanding. Britain has not opted out of economic and monetary union: that is the central point. Our opt-out relates to stage 3; we have a commitment to economic and monetary union. We are in stage 2. Article 109j concerns the obligations of member states during stage 2, from which we have no opt-out because we are committed to economic and monetary union. As the right hon. Gentleman said earlier in his speech, this is a seamless garment.

Mr. Davies: I do not think much of this, but the convergence criteria outlined in article 3 on page 112 spell out the position with regard to the exchange rate mechanism. It states:
the Member State shall not have devalued its currency's bilateral central rate against any other Member State's currency on its own initiative for the same period.
That is close to an obligation.
Article 109m on page 30 is the last article on the transitional arrangements. It states:
Until the beginning of the third stage, each Member State shall treat its exchange rate policy as a matter of common interest.
That presupposes that member states have an exchange rate policy. One does not have to have one; one could let it float. Perhaps it is an exchange rate policy not to have an exchange rate policy. The article presupposes an exchange rate policy which, I should have thought, would be
a matter of common interest.
If there is a commonality of interest, we are all part of the ERM. Whether there is a specific legal obligation, whether it is all a bit vague or whether we can be taken to the court is academic. Once the treaty is ratified, and once

we are into stage 2, the movement will be such that it will not be long before, I am sorry to say, we are back in the old ERM.
The Financial Secretary was very clear about it—clearer than other Ministers; or perhaps I have not listened to them all. He was clear about what would happen when the time was right or ripe: "There is no doubt that we have to get back to the heart of Europe, boys; we cannot be in the second division."

Mr. Cash: I do not know whether the right hon. Gentleman was in the Chamber in the middle of the night when I revealed the document which had been leaked to me and which is entitled "Sterling in the ERM: Lessons from the September 1992 Crisis". It clearly contains advice given to Ministers. It concludes that sterling should re-enter the ERM when certain conditions have been met, and states:
Sterling should re-enter with a narrow band.
That is the advice that is being given, and, what is more, it looks like the advice that is being taken, because we have heard the Financial Secretary pretty well endorse it.

Mr. Davies: I have no reason to doubt the authenticity of the hon. Gentleman's document.
Things have changed at the Treasury since I was there. We used to have tight control of public expenditure, we did not carry expenditure from year to year and we were against the ERM. We did not join, because we thought that it was nonsense. Now, it has all changed. I have no doubt that the Government will get the rate right this time, until it is proved to be wrong. There will be a crisis in Germany or something will happen in Thailand or the Balkans and the system will be blown off course because of fundamental problems and so on. We shall be back in the ERM because the trend is to be in it.
I am sorry for the Prime Minister. He did a good job in negotiating, but he should have had the courage of his convictions at the time and vetoed the wretched thing.

Mr. Michael Spicer: It is always a great privilege and pleasure to follow the right hon. Member for Llanelli (Mr. Davies). I have had great respect for him since the 1970s. I opposed him when he was taking through the development land tax. It was a terrible tax, but I shall not go into that. He did his best and put up a good show. I think that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was also there. It was an unpleasant experience in some ways, but not because of the right hon. Member for Llanelli, who did the best that he could have done on that occasion.
I was especially impressed, as I believe the rest of the Committee was, by the way in which the right hon. Member for Llanelli developed his speech. It is enormously important that we consider the text of the treaty. I am sure that people come up to the right hon. Gentleman, as they do to me, and say, "Look, this is all a bit of a bore. It does not matter much. The French will change their Government, the Germans do not like it, and the British public do not like it either. It will not really happen." The right hon. Gentleman raised some important points, which I shall try to follow up later, but it was by going through the provisions line by line, interspersed with humour, as he has done for the past two hours, that he made it clear that we are dealing with what,


if it is passed, will be the law of the land. It is therefore enormously important that we are given answers to some of the specific questions that he asked.
I am grateful that you have called me at this point, Dame Janet, not only because I have been waiting 16 hours to make my small contribution but because the group of amendments under consideration focuses upon the essence of the entire treaty. The movement towards monetary union, and towards the single currency which lies at the end of that movement, must be the essence of what we have been debating for the 16 or 17 previous sittings of the Committee.
At the root of our debates has been the question whether the treaty and the Bill represent a move towards a federal unitary state of Europe. That question has lain behind most of our debates and most hon. Members, in so far as they have been prepared to move outside the strictures of their whipping systems, have taken their stand according to their view on that basic question.
There are certainly some right hon. and hon. Members who believe in a federal state of Europe. They are few, but they put their case honestly and everybody has respect for them. Some other hon. Members have tended to shy away from confronting the issue. But many hon. Members have had to take a view on whether the treaty is a move towards a federal state of Europe. I take the view that I do precisely because of the aspect of the treaty which is now under consideration—the move towards a single currency.
There are two reasons for my view. First, the logic behind a single currency must be a federal state of Europe, not only because we are in the process of handing over control of our coinage and banking system, and of the cost of money and rates of interest, and are making the associated institutional changes, but because of what such a system would inevitably lead to. Some people say that it would inevitably mean higher unemployment throughout the union. My hon. Friend the Member for East Lindsey (Sir P. Tapsell) made that point many hours ago—in what I believe is theoretically still the same parliamentary day. I happen to agree with my hon. Friend about that, but even if he is wrong, the system inevitably means that there will be pockets of severe deprivation which would not have existed without the single currency, if only because there will in effect be a single pricing mechanism, but there will not be a single wage structure.
Countries with low wages and high prices, paying Greek wages but German prices, will be extremely deprived. Unless the whole thing is to burst asunder and unless there are to be revolutions and revolts in Greece, there will have to be a compensatory central authority and a central taxation and expenditure authority. There will have to be everything that goes with a unitary federal state. That is one reason for believing that monetary union leading to a single currency will result in a federal state.
There is a second reason, which is the coincidence of that fact with the legal environment that is building up relentlessly—Lord Denning has called it "the tidal wave" of European law coming in. The combination of those two facts makes the treaty of Maastricht special and different from the amendments to the treaty of Rome that have come before it, and lethal if one is concerned about a move towards a unitary federal state of Europe, at least at this moment in our history.
9.30 am
Let me pursue the point about the law. First, I reiterate that, when people talk about the treaty not mattering, they are ignoring the fact that we are creating law and that some of that law is very specific. When people say, "The Germans will never allow a single currency to come about," they simply fly in the face of the appropriate articles, such as article 109j(4), which states:
If by the end of 1997 the date for the beginning of the third stage has not been set, the third stage shall start on 1 January 1999.
That will be the law of the land; there is no messing about it. The first point to make about the law is that it will be there and will have to be complied with.
What brought the whole matter sharply into focus for me was the fact that we not only face the inevitability of a federal process arising out of the moves towards a single currency, but, in setting up that single currency, we shall move from a situation where the law may just be reversible by national Parliaments to a position where it is not. One moves, by terms of the treaty, into the world of the irrevocable. The word "irrevocable" is there in the treaty. Until then, there is at least legal debate to be had. It is true that some lawyers say that we have already passed the point of no return in terms of our sovereignty and point to the Merchant Shipping Act 1988. They say that they tried to set that law against a Commission-based law and lost—and, therefore, that we have passed the point of no return. I personally agree with the other lawyers who say that we have not yet reached the point—quite—where the British Parliament cannot unwind the legislation that has brought us to where we are at the moment.

Dr. Godman: I have listened carefully to the hon. Gentleman. May I point out that it is a curious system of federalism where all the power goes to the centre? He cited the example of the Merchant Shipping Act, which was changed because of a decision by the European Court of Justice. Surely that decision taken by the judges in Luxembourg demonstrated in a plain, stark way the fact that that court has become a supreme court for all the legal systems of the 12 member states. We now have a situation,. under article 177 of the treaty of Rome, whereby in England even magistates courts have referred decisions to the European Court of Justice for a ruling. There is a growing acceptance of the power of that supreme court.

Mr. Spicer: That is correct, and about 15 hours ago we debated that subject, when my hon. Friend the Member for Chingford (Mr. Duncan-Smith) made a telling speech in which he quoted cases to substantiate that point. Had I been able to intervene then, I would have referred to a number of other cases—

The Chairman: Order. We discussed those cases earlier. We do not want to discuss them again now.

Mr. Spicer: The only point that I would make in response to that intervention—

The Chairman: Order. The hon. Member does not have to respond, especially as I nearly called the hon. Member for Greenock and Port Glasgow (Dr. Godman) to order for raising the issue of the court of justice.

Mr. Spicer: The combination of the law, which is becoming all pervasive, and the fact that, with the single


currency, that law involves the use of the concept of the irrevocable makes certain the move towards federalism if the treaty is passed.

Sir Trevor Skeet: Article 3a deals with the irrevocable fixing of exchange rates. That is excluded by the protocol, but if we enter stage 3, which is anticipated, the trigger is set and we are caught by it.

Mr. Spicer: My hon. Friend underlines the point. It is important to be clear about the meaning of "irrevocable." It means a coach and horses being driven through the fundamental principle guiding and governing the British House of Commons, that no one Parliament can bind another Parliament. We do not have a written constitution, but we have what we thought were inalienable conventions.
It seems impossible for us to maintain the sovereignty of Parliament in that sense if, from now on, a Parliament will bind irrevocably—which means for ever—all other Parliaments. We shall have abolished the sovereignty of our Parliament. The combination of the logic of what is being done on the road towards a single currency and the law arising out of the creation of that single currency is moving us inevitably towards a loss of sovereignty.
I do not understand the concept of pooling sovereignty. One either has or does not have sovereignty. Somebody must be at the top and through the Maastricht treaty, and in particular the aspect of the single currency, we move from the point at which we have sovereignty to a point at which we do not have it.
One can take a view about whether that is good or bad, but that is what will happen. That makes Maastricht different from other amendments to the treaty of Rome. People may say, "You voted for the Single European Act" and so on, but we are now moving into a fundamentally different area by establishing this irrevocable fixing of exchange rates, the single currency.

Mr. Bill Walker: The Committee has heard me many times draw attention to the objectives of the 1707 Act and compare the situation created by that measure with what is happening now. This Parliament was established as a result of that Act, which required the conditions to be for ever, which is much the same as irrevocable. I have been emphasising that from the beginning. A single currency and the remaining measures will make all the difference. We created this place and we know precisely what we have. We shall be creating that in Europe.

Mr. Spicer: My hon. Friend makes a good point which he has made previously. It bears repeating because it is appropriate.
If the Government were participating in the debate, their answer would be that it may be what I have said it is, but it is irrelevant because we have the opt-out. With regard to the question of the opt-out, I shall refer to some points made by the right hon. Member for Llanelli. His concept of the seamless web is absolutely fundamental in this context. He raised many points in the context of the seamless web, but he raised a specific point which is valuable. I hope that the Government will examine carefully the text of the right hon. Gentleman's speech because it is valuable.
We have not had an answer to a specific question asked by the right hon. Gentleman—it is important that we get an answer because it is a specific point and the hon. Member for Dagenham (Mr. Gould) underlined it. The right hon. Member for Llanelli raised the matter of the wording in article 109e(5):
During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank, in accordance with Article 108".
The Financial Secretary said that that does not mean what it looks like: it means that the legislation which is required to move towards an independent bank will be introduced only if the decision is made to move to a single currency. My right hon. Friend the Financial Secretary said that that would be the only sensible thing to do: there is no point in setting up an independent bank if we do not move towards the single currency for which it is appropriate.
That is a fair point and I agree with it. However, as the hon. Member for Dagenham said, that is not what the law will say. If the treaty is passed, the law will say what article 109e(5) says. I have scoured through the appropriate protocol, but I cannot see any reference to an opt-out on 109e(5). I can see references to opting out on 109e(4), but there is no reference to 109(e)5, which suggests that we have not in any way allowed for opting out of those words which will become the law of the land. The Government are under a great obligation specifically to answer the question: if we opt out of the single currency, will we not have to set up significant institutions immediately?
The right hon. Member for Llanelli played for a while with and was amusing when he talked about notes being passed backwards and forwards within the Treasury. This matter of the bank is crucial. It will change the whole process by which monetary policy has been conducted in the United Kingdom for hundreds of years. We are talking about something that is absolutely fundamental.

Dr. Godman: With regard to article 109e(5) becoming the law of the land, could that be achieved without the intervention of the court of justice making a decision? I am not going out of order, Mr. Morris, because I am referring to article 19, which spells out the relationship between the EMI and the court of justice. Article 19 says:
The acts or omissions of the EMI shall be open to review or interpretation by the Court of Justice".
Before article 109e(5) can become the law of the land, a ruling from the European Court of Justice will be required.

Mr. Spicer: My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) is an expert, so I shall give way to him.

Mr. Legg: The specific article to which my hon. Friend refers will become part of the supreme law of the European union. If the United Kingdom does not comply with the supreme law of the European union, that matter can be taken to the European Court. My hon. Friend may also be aware that at present European central banks in France and Spain in particular are moving towards independence. It is not beyond the realms of fantasy to believe that some of our partners in Europe may take us to the European Court to make us start the process of taking our bank to independence because of the additional credibility that they would see that lending to EMU.

Mr. Spicer: My hon. Friend has answered the point more elegantly that I would have done. I was going to make the same point that here we have the law and the


question is whether we comply with it. If we did not comply with it, we would be subject to being taken to the court, which would then adjudicate whether we had applied the law. If we had not, it would insist that we did. To my mind—I am not a lawyer—the words are straightforward. If they can be interpreted differently, I shall be reassured.
I want to believe in the opt-outs. I find it difficult to believe in them.

Mr. Knapman: Whether or not we are lawyers—it turns out that we are not—would not it beggar belief that any nation would go through the pain of convergence and then not proceed to a single currency?

Mr. Spicer: That is the other point. The question about what credibility one attaches to the opt-out is partly, as we have discussed today or tonight, or wherever we are, one of running through the text and illustrating that the text shows how stage 2 legally moves smoothly into stage 3. That is a valuable thing to have established. The Government will have to show us what are the legal cut-off points and how we can contain the opt-out in a meaningful way. We need to hear much more about that because an interesting question has been opened up and we need hard answers.
My hon. Friend the Member for Stroud (Mr. Knapman) has raised the psychology of the whole thing. If one has signed up to the establishment of various convergence conditions—clearly there is some argument to be had yet about how legally binding those converging conditions are—under stage 2, whether or not it is legally binding, one has an obligation. In the Treasury things will be moving in a direction which will lead to pain, as my hon. Friend says. One is involved directly or indirectly in the establishment of many institutions.
The EMI is a transitory institution. It has powers attached to it in stage 2 which we have had detailed for us. We then move to institutions which are not transitory but permanent. We have been involved in setting them up. Undoubtedly, officials will go backwards and forwards and get more and more involved and excited in their construction and their management.
I need to be persuaded that in a few years, having set up the institutions and been a party to many of them and legally bound into the processes that lead up to stage 3, we can cut ourselves from it. If the treaty is passed, I shall certainly be one of those who argue for the opt-out to be maintained because that will be the best that I shall be able to achieve at that time. But it worries me that I may be told then that the pass has been sold.
The Government will say, "Where were you in 1992–93 when all these things were being discussed?" As it happens I was here. One of the reasons why I am speaking tonight is that the Whips will not be able to come to me and say, "Spicer, you should have worked it out three or four years ago when all these things were being discussed. It was important then that you should have got your thoughts sorted out." I have tried to sort out my thoughts now because I want to anticipate that situation. I do not say that I will not argue like mad in two or three years' time, but at least they will not be able to say of me that I did not think it out at this stage.

Mr. Knapman: My hon. Friend referred to officials and civil servants. Will we need more of them because it will be a complicated policy, or fewer of them because we shall no longer be running our own policy? Does my hon. Friend envisage any significant effect on the numbers of civil servants as a result of the passing of the treaty?

Mr. Spicer: The term "ratchet effect" has been used throughout the debate and that analogy is appropriate to any growth of administration. I suspect that we shall have more officials here and in Europe.
In conclusion, the amendments are absolutely central to what Britain and its constitution will become in the future. We may be setting up an inexorable process. The words "acquis communautaire" appear as one of the objectives of the treaty. It means a ratchet effect. When a process has been established, one can only move forward.
In my view, through the treaty, monetary union and the move towards a single currency we are making the jump towards a loss of sovereignty. We are crossing the Rubicon. The only issue is whether the opt-out that we have established is foolproof. Great doubts have arisen and many coherent points have been made. If the Government are to give any credibility to the concept of the opt-out, it is essential that they can demonstrate clearly how we can retain that opt-out and really believe in it.

Mr. Betts: The issues that we have been debating throughout the night—the central bank, economic policy and now the moves towards economic and monetary union—are at the heart of the treaty. I agree with hon. Members who spoke during the night and made the point forcefully about the hours that we are spending in debate, with many of us having been up throughout the night. It is not the proper way to give these issues the serious and necessary consideration that they merit.
Parliamentary sovereignty has been mentioned many times, but, given the fact that the House has not debated these matters in prime time, those words stick in the throat rather than trip off the tongue. I believe that the House has done neither itself nor the people we represent any service.
In the past, I have been given lectures by irate Liberal Democrats about the process of open government, access to information and the public being able to see what happens, yet they choose to debate these matters when the vast majority of the public we represent are in bed, as are most of the media who might report matters to them. In future, I will take no more lectures from Liberal Members. Although they are all absent, presumably they will at least do us the courtesy of reading Hansard. When Liberals refer to these issues in future, I shall simply ask them what they did on 24 March 1993 at 10 pm.

The Chairman: Order. I called the hon. Gentleman to speak on amendment No. 81, and not to give us a general lecture about parliamentary procedure, so I hope that he will now address the amendment.

Mr. Betts: Thank you, Mr. Morris.
Of the hon. Members who have spoken on these issues and throughout the debates on the treaty, a few have made it clear that they are in favour of Maastricht completely and absolutely and many have made it clear that they are against the treaty absolutely and completely. Some of us, however, do not fall neatly into those categories, and we must in the end decide how we vote on particular amendments, recognising that we have reservations about


elements of the treaty. I share some of the reservations eloquently expressed by my right hon. Friend the Member for Llanelli (Mr. Davies) when he introduced his amendments and in previous debates by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) and others. I want to raise some of the very questions that have been raised. We have not always had adequate answers from the Government to those questions. In particular, the legal advice has been not just inadequate but almost non-existent.
I also recognise that there are parts of the treaty, particularly in the detailed areas that we are now discussing on economic and monetary union, which are open to interpretation. I do not know what the interpretation of the European Court of Justice may be or how the Council of Ministers will interpret these things when it debates some of its powers, so I must come to my own best judgment.
One of our problems in debating specific amendments is that we are debating a treaty which has been negotiated by the Government. It is a treaty which Parliament can discuss, debate and question; but we cannot select bits and pieces from the treaty and decide which we will vote for and which not. In the end, we must decide whether we are prepared to accept the treaty as it is, in total. That involves compromises—just as the original negotiation of the treaty must have involved compromises—for those of us who have to form a view on it now. While some of us may have instinctive sympathy with some of the amendments in isolation, we recognise that we must judge them in the light of their total effect on the treaty, and we must decide whether voting for them here would mean that the treaty could not be ratified and where that would leave the country's economy, its monetary policy and all the other issues that we are now dealing with.
One of my concerns about the whole process that we are going through, particularly as we consider these important matters of economic and monetary union, is that we are forced to debate them in this way. I should have been much happier if we could have debated these issues before the Government negotiated Maastricht. We could have had a public debate about the way we wanted to go and the Government would have been aware of that before they entered into this treaty, which we have now to decide on as a whole.
There is a problem with the wider powers now contained in this treaty which are going not just to the Commission but to the Council of Ministers. That is mentioned at various stages in the sections on economic and monetary union. One of my worries about the process is that when matters go to the Council of Ministers they immediately disappear from direct scrutiny and go behind closed doors—a process which is very different from debates in this Chamber. The reaction of some hon. Members is to say that we should not have powers of that kind going into European institutions. I would argue that it may not be wrong for powers on economic and monetary union to move into the European dimension. Perhaps powers should go from this Parliament, but I want the European Parliament to play a greater role in those processes.
It has been said that hon. Members who support federalism should say so. I shall not argue that case, but

there is a debate about whether some of the powers that go to Europe through the treaty will rest with the right institutions, and about whether more powers should go to the European Parliament. That debate is still to come.

10 am

The Chairman: Order. The hon. Gentleman is almost making a Second Reading speech. He must address the amendments that have been moved. He cannot give us a general Second Reading speech.

Mr. Betts: I was seeking to show that the Council of Ministers is relevant to some of the issues involved with economic and monetary union. We are debating amendments to clauses that contain references to powers going to the Council of Ministers, and I was seeking to draw that out, but I shall take your advice on the matter, Mr. Morris.
I readily accept many of my hon. Friends' criticisms of the economic and monetary policy contained in the treaty. The development of those processes and of the independent central bank are some of the key issues. I have major reservations about an independent bank and how it can operate within economic and monetary union, because that highlights some of the potential conflicts between the economic and monetary aspects of the treaty. It will cause difficulties and we must each form a view of the conflicts to determine how we shall vote on the treaty.
When considering how to approach the central bank, and how it fits into the workings of economic and monetary union, the potential alternatives—as opposed to those contained in the treaty—must be examined. If hon. Members do not like what is in the treaty, they must be prepared to argue for an alternative, which might be available.
There has been a great deal of discussion about the opt-out and I share the views of some hon. Members—who will probably decide that they cannot support the treaty—that the opt-out exists to give the Government an excuse to delay a decision until they can bring the House round to accepting stage 3 of economic and monetary union. I do not believe that it is realistic for this country to move to stage 2, which we are committed to through economic and monetary union, but not to move to stage 3. Once we accept stage 2, we cannot for ever remain the one member of the European Community which wants to remain free with a separate set of arrangements.
I therefore believe that, in ratifying the treaty, we are being asked to accept that, once we accept stage 2, stage 3 will ultimately follow. The Government will no doubt argue that there is an alternative to joining the independent central bank—stage 2, in which the Bank of England, would be separate and independent, in a nationalistic sense. To some extent, it would be independent of the rest of the European Community.
I do not believe that if every other country in the European Community is a member of the central bank, which will have the power of all the other Governments and economies behind it, one country can realistically stand aside and believe that it will be feasible for its central bank to operate independently while that country remained a member of the Community. The Government cannot ask any hon. Member to believe that that position is sustainable and they ought to deal with that problem in detail as they have not done so.
Could the Government ratify the treaty if the amendment moved by my right hon. Friend the Member for Llanelli were carried by the Committee? Everybody has had to find legal advice. I may have been hallucinating from lack of sleep, but a few hours ago I had a vision of the Attorney-Geneal crossing by the Government Front Bench. Perhaps someone will confirm that I did see the right hon. and learned Gentleman.
It is important that Members should know the implications of their voting for an amendment. Amendment No. 27 deals with the social chapter opt-out. If that amendment is accepted, we shall be refusing to ratify a protocol that provides for an opt-out. The argument is that refusing to opt out does not amount to opting in and does not, therefore, amount to agreeing to anything. Acceptance of the amendments with which we are dealing now would be a very different matter. On the opt-out, that would keep us from moving automatically to the third stage of economic and monetary union, and would prevent us, I believe, from legally ratifying the treaty. Britain would not be removed permanently from the protocol. What we would have is an obstacle to a process that would otherwise be automatic. The treaty confirms the rest of the process, so the two situations are quite different.
The reference to stage 3 in the treaty amounts to acceptance of that stage for every other member country without the opt-out. If Britain were to refuse to accept stage 3, it could not ratify the treaty. In effect, we should not be accepting the process by which every other member state was to move towards stage 3. What the opt-out provision does for Britain, in terms of stage 3, is to put it in the same position as a member state that gets a derogation under the treaty. Such member states will effectively be in the same position as Britain, but they will have to ratify the treaty, including stage 3, even though they will not move to stage 3 themselves. We cannot have a situation in which some Community members are not at stage 3 but have had to agree to the process in order to ratify the treaty, whereas Britain stands alone.
I assume that, in the end, the Attorney-General will give us some advice on these points. The matter to which I have just referred is very important. As I have indicated, a vote for the amendment, which, if carried, would prevent the treaty from being ratified, would be a vote against the treaty as a whole. That is why it is so important that we should get appropriate legal advice.

Mr. Spearing: I understand my hon. Friend's personal dilemma. In giving expression to it, he has highlighted what I might call the structural relationships of these matters. The Attorney-General has not spent much time at this sitting of the Committee. Does my hon. Friend agree that before we vote on this amendment the very important matters that he has identified should be commented upon by the Attorney-General or by the Financial Secretary following consultation with the law officers of the Foreign Office or the Law Officers of the Crown?

Mr. Betts: My right hon. Friend is absolutely right. We have a right to expect legal advice from the Attorney-General. On previous occasions, on the question of opt-outs, such advice has been forthcoming. It has been shown that legal advice given within Departments to Ministers can be questionable. I am not suggesting that it

is deliberately questionable; I am simply making the point that it is important to have proper advice from the Attorney-General. This cannot be stressed too strongly.

Mr. Gould: I have been listening with interest and sympathy to the issues raised by my hon. Friend. He is clearly right to say that if the House were to vote for the amendment it would make it difficult, if not impossible, to ratify the treaty. But he has also made it clear that he disagrees with many of the treaty's provisions. Therefore, presumably he wants a treaty, but not necessarily every aspect of the Maastricht treaty. If that is his objective, there is only one way by which he can achieve it. There is no point in his voting for the treaty as he will not obtain any amendments. However, if he votes against the treaty by voting for an amendment such as the one under discussion and it is carried, and this country or any other were to refuse or be unable to ratify the treaty, it could not proceed. We should then be able to have exactly the sort of informed negotiations that my hon. Friend wants. We could conduct a new set of negotiations and, in the light of the very arguments that my hon. Friend has been advancing, produce a better treaty.

Mr. Betts: I accept some of my hon. Friend's criticisms of the treaty and agree with some of his analysis. I part company with him over his theory of what would happen if one of the amendments were carried and the Government could not ratify the treaty. My hon. Friend obviously believes that such an outcome would result in the treaty coming to a standstill while we had a separate round of negotiations to bring the treaty back into line with his views, and perhaps with mine on some issues. That begs two questions. First, if we had more of those negotiations, would they result in a more favourable treaty? Secondly, and more important, would those further negotiations take place or would the people of Britain—of whose credentials other people in Europe had always been suspicious—once again be regarded as not sufficiently pro-European, thus convincing the rest of Europe to carry on without Britain?

Mr. Gould: They cannot.

Mr. Betts: My hon. Friend says that Europe cannot carry on without us. I think that at some point the patience of other European countries may give and they may decide to construct a European Community that either has Britain attached to it in a different role, but not as a full member, or leaves Britain on one side as they carry on.

Mr. Gould: If we—or the Danes or the Germans—were the instrument by which it became impossible to ratify the treaty, I do not doubt that we would attract much odium from our European partners who would take great delight in blaming the perfidious Brits yet again. But I guarantee that, in private behind their hand, they would give an enormous sigh of relief that they had at last been let off the hook of a treaty that is manifestly unworkable and has failed to secure the support—let alone enthusiasm—of the people of Europe.

Mr. Betts: That is ultimately a matter of judgment. My hon. Friend has come to one conclusion. Having spoken to people in Europe—in the European Parliament and in our sister parties in Europe—I know that it is not the view that they express. The general view that I have received is that if Britain were not to ratify the treaty, there would be much


concern among people in Europe. But they may well not express that concern by saying, "Oh dear, how can we change the treaty to accommodate all the wishes of Britain?" They might just say, "Once again, Britain has proved not to be as pro-European as we would like—perhaps it is time that we moved on without them."

Mr. Cash: Perhaps the hon. Gentleman has not noticed that the Danes have turned down the treaty in a referendum and the French only passed it by an absolute whisker—only 36 per cent. of the French electorate were in favour. We all know that the Germans are in a state of turmoil over the treaty. The people of Europe—whom the hon. Gentleman is alleging are in favour of the treaty—have gone off it. The leaders continue to believe that the grand design will work. Perhaps they do so for reasons of stubbornness, pride or because they have a grand idea that they are reincarnations of Henry of Navarre. The treaty will not work, because people do not want it. Some 73 per cent. of the British people say that they want a referendum, and I think that they should get it.

Mr. Betts: In the three countries that the hon. Gentleman mentions the situation is different. The German issue was described earlier in the debate as a technicality and no one seriously suggests that the German Government will not ratify the treaty. The Danes are to hold another referendum. From what I have heard and read, the way in which the Danish issue has been finessed leaves little to the imagination. Some of the key issues that we are concerned about are not necessarily the issues that have been addressed in Denmark.
The French have had a referendum and if the French people had not accepted the treaty we would be in a different situation. However, they did, and Britain is seen to be dragging its feet and has been viewed in the past as not being as committed to Europe as other countries are. Many of those who oppose ratification do not think that we should be in the European Community at all. By no means do I direct that comment at all those who oppose ratification.

Mr. David Ashby: Does the hon. Gentleman agree that the French referendum was a reflection of what happened last week in the French elections rather than a real view of Europe? The hon. Gentleman is right to say that the people of Europe are absolutely in favour of Maastricht. Votes are often a reflection of the political climate in a country rather than a view about Europe.

Mr. Betts: I am not sure that we could draw all the lessons from the French elections that people would like to draw. One of the lessons that can be drawn from them is that if the Maastricht process collapses and the good will is lost it may not be possible to return to square one in the negotiations and reconstruct a treaty within a reasonably short time. That point is made forcefully by people representing a wide range of political opinion in Europe.
There are growing forces for nationalism in Europe and they may be given succour if the treaty collapses. We saw the vote last week for Le Pen and his party and we have witnessed the growth of the Republican party in Germany. People are concerned about those things. I do not say that

Maastricht is the last bastion against fascism because I do not want to go overboard, but those forces are around and no one quite knows what would happen if the Maastricht process collapses. We must sound a cautionary note about that.

Mr. Alan Simpson: Will my hon. Friend at least acknowledge that the process may work in precisely the opposite way? There may be a gap between European parliamentary processes and the people, and that may lead to a huge sense of disbelief about the economic and political momentum into which Europe seems to be locked. My hon. Friend spoke about his dilemma in deciding whether to vote for a treaty containing huge elements with which he profoundly disagrees. Perhaps I can give my hon. Friend an analogy. Anyone who wants to join the boy scouts does not begin by locking himself into the Moonies, because it is better not to be in an institution at all than to be in one that we cannot leave. It may be healthier for my hon. Friend to make a stand and set out precisely the positive ground of the Europe that he wants to be in, rather than to be locked into a Europe that he does not want.

Mr. Betts: If we are to remove the forces of nationalism and racism in Europe, we must take the European debate to an agenda that will address the real problems of unemployment and recession. It is a matter of judgment whether acceptance of the treaty and working forward from there gives a better opportunity than either allowing the treaty to collapse or seeing Britain removed from the process while other countries continue with it.
Having studied the matter for several months, I concluded that accepting the treaty, imperfect though it is, and building on its elements will give us the best opportunity to address problems—rather than risk the whole process collapsing or Britain remaining outside European development. We run that risk if, by our voting for certain amendments, the treaty is not ratified.
It is said that Britain would be in the slow lane or second division, and that opting out of stage 3 is part of that process. If we did not ratify the treaty—to continue the motoring analogy—we would be on a B road going in a completely different direction.
I choose to approve the treaty and to vote down the amendments because I share the concerns of my hon. Friends about unemployment, growth and investment—though I arrive at a different conclusion about how they should be approached. I acknowledge that most hon. Members who raise those issues do so not in a narrow, nationalistic sense or argue that power must remain within the House. Nevertheless, some hon. Members contend that the House should retain all powers and that votes in Parliament will solve our problems, irrespective of our membership of the Community. To retain power may be politically desirable to them, but if Britain were to be independent of the Community, it could only achieve certain things in the European and international economic climate that it would confront. In this day and age, it is impossible for a country such as Britain to grapple with the massive issues and the forces of international capital. We must recognise how much we depend, as a small nation, on trade and the difficulties we would face using a separate currency. We must recognise the enormous shifts of capital and the forces of speculation.
We must question whether votes in a Parliament of a United Kingdom excluded from the Community and its processes would achieve the objectives of full employment, growth and investment that many Members who have different views on how to vote want to achieve.
Many aspects of the treaty are potentially or actually contradictory. As one reads through it, one can detect a shift in its monetary and economic approach from growth and employment to price stability being the all-important issue. I readily accept that aspects of the treaty have all the hallmarks and elements of the monetarist age of the 1980s. They were written for different times and from a different perspective, to meet a different set of problems.
I reject the notion that if price stability is achieved, everything else will fall into place and full employment will automatically occur—or that full employment would not matter very much. If we are to address the problems of the 1990s, we must turn this debate around and tackle the real problems of the economy, investment and growth. Price stability—by which is meant low inflation, because no one can argue for nil inflation—is only likely to be achieved if the real economy is put right.
People talk about the Bundesbank, how it operates and how it might be a model. It should not be argued, however, that, because it is independent, the Bundesbank has created price stability, thus making the German economy successful; more to the point, the German economy has been successful because of the investment that went into it immediately after the war. That continual increase in growth has allowed workers to enjoy regular improvements in living standards and firms to increase their profits. The pressure for price inflation has not been there.
In fact, the Bundesbank's job has been relatively easy. It has worked in harmonious conditions: until the recent problems of unification with East Germany, it could do no wrong. It strikes me as a little simplistic to use the analogy of the Bundesbank in establishing how we should develop the future of Europe.
I recognise the difficulties in the treaty. The economic and monetary sections could almost have been written by different people. The Government bear some responsibility for those problems; I do not think that it is up to Opposition Members to defend the wording of the treaty. Naturally, the Government will defend it because it is their treaty, but we shall put them on the spot in pointing out its many inadequacies.
I believe that failing to ratify the treaty would be wrong: I believe that we must remain at the heart of Europe—a phrase which has been used many times in the debate. We must, however, look at what is in the treaty—as suggested earlier by my hon. Friend the Member for Oxford, East (Mr. Smith)—and see how we can build positively on its contents in helping to set the agenda for growth, investment and employment in Europe in the 1990s. We must recognise that there are openings for interpretation in the economic and monetary aspects. We must argue as strongly as we can for the right interpretation to set the agenda for the future.
We have heard many references throughout the debate to the clauses in the Bill, and the sections of the treaty, that should have primacy. I strongly believe that we should take article 2 as the basis—not just because it appears at the beginning, although that is probably a fairly good point at which to start. Some time ago, I had an argument with my hon. Friend the Member for Merthyr Tydfil and

Rhymney (Mr. Rowlands) about whether the treaty should be read backwards or forwards; for my present purpose, I shall read it forwards.
Article 2 has been mentioned many times. It refers to
harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion".
That is the basis on which the rest of the treaty hangs, and it is linked with many other aspects of the economic and monetary criteria that are laid down.
Article 3 refers to the timetable set for economic and monetary policy. All the matters concerned are for the purposes set out in article 2. My right hon. Friend the Member for Bethnal Green and Stepney tried to suggest earlier that, ultimately, the whole policy was guided by the principles of stable prices and sound public finances; but article 3 states that, notwithstanding that guidance, the activities referred to are
For the purposes set out in Article 2.
When reading the economic and monetary sections of the treaty, we must keep returning to the points in article 2, and stressing those points.
I accept that, to some extent, that is a subjective reading of the treaty, but I believe that everyone who reads it has a subjective view. Because, in my view, the treaty will ultimately be ratified, it is important for us to bear those points in mind and use them as a basis for future discussion.

Mr. Gould: Those who drafted the treaty thought of my hon. Friend's point about its interpretation. They make specific reference to it in article 105, which establishes the primary objective of the European central bank:
The primary objective of the ESCB shall be to maintain price stability.
It goes on to say:
Without prejudice to the objective of price stability, the ESCB shall support the general economic policies…laid down in Article 2.
In other words, article 105 takes on board the very argument with which my hon. Friend is dealing and says that, "without prejudice" to the more general provisions in article 2, the overriding objective of price stability shall nevertheless take effect.

Mr. Betts: I do not demur from my hon. Friend's point, which shows the potential for conflict in the treaty and why I do not seek to defend every aspect of it. It contains contradictions, and one can interpret things in different ways. As I said earlier, one problem is that some of the economic criteria in the treaty appear to have been written in different languages and emphasise different points from the monetary criteria.
I am concerned about the independent central bank, not only because of the independence but because of article 105, which my hon. Friend the Member for Dagenham (Mr. Gould) just read, and which is the guidance given to the bank about the objectives that it will pursue. Price stability is given primacy, but there is a different emphasis in the general objectives of the treaty where it is issues such as employment and growth which are given primacy.
I was going to mention later the general principles in the protocol for the EMI in article 3 on page 104, but I shall do so now. Article 3 states, as does article 105:
The EMI shall act in accordance with the objectives and principles stated in Article 2
which links back to article 2 of the main treaty through article 3a, which is for the purpose of achieving article 2. There is so much interaction in the treaty that it shows all the hallmarks of being written by a committee, or even two committees. One of the problems is that the treaty is open to different interpretations, depending on which article one selects and which aspect one emphasises to make a particular point.

Mr. Spearing: I appreciate my hon. Friend's point, which is substantially and philosophically similar to that made by our Front-Bench spokesman. The broad principles and aspirations and the humanitarian approach of the general principles of the early articles should be built on, but our argument, so ably put a little while ago in the analysis made by my right hon. Friend the Member for Llanelli, shows that the operational small print on which actions and policies are determined, reports made and disciplines ensured makes those aspirations generally difficult, if not impossible. That is why the treaty must not be ratified.

Mr. Betts: I do not necessarily agree with my hon. Friend's conclusion, as there is a different emphasis in different parts of the treaty. I would still argue that article 2 sets out the general purposes for the rest of the treaty. I would also say—

The Chairman: Order. The hon. Gentleman had a helpful intervention from the hon. Member for Newham, South (Mr. Spearing). We are dealing with amendments that cover operational points. The hon. Gentleman has hardly alluded to them, but keeps returning to article 2 and making generalised comments. He must deal specifically with the amendments.

Mr. Betts: I was trying to say that the operational points are linked to the general issues. Indeed, article 102a begins to spell out the operational points but is clearly linked to article 2. Article 102a states:
Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community as defined in Article 2".
However, I would be the first to accept that the wording of the operational aspects can be difficult and that we shall have to deal with the issue of interpretation.
The operation of the budget deficit criteria—the avoidance of a deficit—is very much part of the move towards economic and monetary union. It is one of the key aspects of convergence, which has received a great deal of attention.
Our debates so far have shown that, although the conditions might at first be thought to be a clear and rigid set of criteria, meaning that a country has at all times to set its governmental deficit at no more than 3 per cent. of GDP, and its overall governmental debt at no more than 60 per cent. of GDP, when we start to analyse the exact wording that surrounds and conditions the criteria, we get a different point of view.
The rigid criteria refer only to the initial report that has to be produced. As has already been said, when action is

to be taken on the report, account has to be taken both of the extent to which the deficit is incurred because of a need for investment and of the medium-term and budgetary policies of the Government concerned. I accept that, as was said earlier, it would have been more helpful if the nature of counter-cyclical measures had been clearly spelt out in the treaty. That has not happened, but the fact that the word "counter-cyclical" does not appear does not necessarily mean that the reference to medium-term strategies cannot allow for the need for a counter-cyclical strategy when judging whether a budget deficit is excessive as part of the process of moving towards economic and monetary union.
That is a clear example of the possibility of drawing out from the treaty views different from those that it might initially have been thought to contain. It follows that there will be a need to ensure that within Community discussions and debates such issues are interpreted in one way rather than another. Indeed, one could argue that one of the issues highlighted is the need clearly to separate out the reasons why Governments borrow money.
No one could be in favour of excessive deficits. The very nature of the word "excessive" implies that the deficit is wrong. However, I strongly argue that we should focus on the need for long-term investment. If necessary, and within the criteria, we should be able to increase Government deficits in order to borrow for long-term infrastructure investment, which would be an integral part of trying to set the agenda for the growth and development in Europe that we have already discussed. Such matters can therefore be interpreted differently from the way in which they have previously been interpreted.
I can see problems that need attention, and I shall now deal with the transitional provisions. Article 109e, for example, takes us back to an emphasis on financial policy:
the Council shall, on the basis of a report from the Commission, assess the progress made with regard to economic and monetary convergence, in particular with regard to price stability and sound public finances".
I readily accept that in the operational conditions governing the transitional provisions the emphasis has been shifted back to price stability and sound public finances. However, again the wording is potentially open to interpretation. The exact words are:
assess the progress made with regard to economic and monetary convergence, in particular with regard to price stability and sound public finances.
That is not a rigid provision. If we are in the process of accepting the treaty and then seeing where we go from there, that article allows room for interpretation, to bring in issues other than price stability and sound public finances.
I accept that for convergence it is vital to get back on the agenda the issues of growth, investment and employment which are contained in article 2, but which do not appear specifically in article 109e. For example, article 130a, which deals with regional policy, contains a specific requirement to consider ways of removing divergences in regional policy—different growth rates, employment levels and standards of living—in different parts of the Community. The treaty must be read as a whole. I would argue that, although article 109e specifically refers to price stability and sound public finances, it does not actually exclude other criteria, which could be brought into play in a reappraisal of the convergence criteria. We should like those real economic issues to be addressed. That is why it is important that hon. Members who are highly critical of


the treaty should recognise that there may be other interpretations, which may even be more helpful to them in their pursuit of their objectives.
Much emphasis has been placed on article 109j, which refers to the fulfilment of conditions for eventually moving through to stage 3 of economic and monetary union. That provision is highly financial in content, referring to price stability, the Government's financial position and the exchange rate; the ERM is also mentioned. I should have been much happier with the treaty if those parts of it had also dealt with the real convergence criteria. I do not justify or defend every aspect of the treaty or claim that it is perfect, I agree that certain parts of it are deficient. In their present form, the conditions of convergence in article 109j are not the conditions that I would have chosen to include.
Ultimately, however, we have to decide whether we should abandon the whole process because of that or accept that those criteria, such as they are, are nevertheless part of a wider treaty and that, in the interpretation of those criteria set in that wider context, there will be pressures on Governments in the Community that are different from the pressures that existed—and the issues that were paramount—when the treaty was drafted. The interpretation of those criteria will be a matter of political judgment when the time comes.

Mr. Cash: Does the hon. Gentleman accept that if the treaty is to be ratified at all, it has to be ratified by 12 member states unanimously? In the light of the hon. Gentleman's thoughtful speech, let me ask him this: if there is something inherently wrong with the treaty—and he is suggesting that there is—how are we to get the 12 member states which have unanimously agreed to the treaty to agree unanimously to unravel it, especially when five or six of them have their noses deep in the subsidy trough, which is the reason why they went into the thing in the first place? If we are locked into the treaty with no right of secession, and with unanimity being required to unravel it, the whole of the hon. Gentleman's argument collapses.

Mr. Betts: The hon. Gentleman speaks of noses in the subsidy trough. I believe that the structural funds, which transfer resources to poorer members of the Community—particularly countries such as Spain—are extremely important in terms of Community funds. I do not regard the process as involving noses in the trough. I happen to consider the funds an important part of the real criteria for convergence, rather than the simple monetary criteria laid down in the treaty. Far from rubbishing and deriding that process, I should like to see the structural funds enhanced.
I do not necessarily accept all the wording in the treaty and have reservations and concerns about it, but I emphasise that certain things can be done within the European Community structure, and one of them is to increase the structural funds and try to consider points of real economic convergence that are already permissible within the treaties that we have signed under European legislation, and how we might achieve them. Political will is needed to push ahead with that if it is to be achieved.
Those who oppose the treaty's ratification hold diverse views. Some argue that ratification would lead us back to a different set of negotiations. Others would like to abandon the whole thing and not have any fresh negotiations. Some are philosophically opposed to the

creation of a single currency, and I understand their view. In my view, the essential aims of the treaty—the move towards a single currency—should be supported. We should act to remove the power of the speculators in the money markets. I cannot think of any other way to do that.
I accept that there are alternatives, and it is incumbent on hon. Members who do not want to go down the Maastricht road to spell out the alternatives. We could allow the currency to float and let the speculators determine the levels, but that would not be a sensible long-term way to run an economic policy. Speculators should not determine on a day-to-day, week-to-week, month-to-month basis the value of our currency.

Mr. Gould: The evidence of recent events, before 16 September and currently in the case of other currencies, shows that enormous power is given to the speculators by establishing a gap between what one says one's currency is worth and what it is worth in the marketplace. Creating that stance makes it possible for the speculators to have a field day.
It is nonsense for my hon. Friend, with whose speech I substantially agree in most other respects, to say that somehow, by fixing our currencies or by eliminating the foreign exchange markets, we would remove our economies from the speculative effects of currency speculation or insulate ourselves against the factors that are reflected when there is turmoil on the foreign exchange markets.

Mr. Betts: By moving to a single currency in Europe, we would remove the speculation. Other than that, I am considering the alternatives. Free floating is one, although I do not accept it. A rigid currency, with one country trying to hold its currency at a certain value independently, is not a realistic stance. If interest rates were a problem in the ERM, they would be an enormous problem and be completely out of the control of Governments if one Government tried to fix their currency rigidly and independently. Or one could move to a managed system such as the ERM, which is a staging post in the treaty towards a single currency.
The problems that we had in the ERM were twofold. We went in at far too high a rate. The Government got that badly wrong. The ERM was not designed as a permanent set of fixed rates between different currencies. It was established as a managed system under which there could be adjustments periodically to reflect different pressures. That was not allowed to happen, so enormous cracks appeared as pressures built up.
I accept the point made by my hon. Friend the Member for Dagenham that the problem of speculation throws up differences within different economies. The problems caused by those differences must be resolved. I accept that devaluation has been a way of resolving those issues in the past. Before the election, I argued for a realignment within the exchange rate mechanism precisely because of those pressures.
In the long term, I would argue that devaluation of the currency is not the sort of policy objective which we want to follow. We should be getting back to the issue of why devaluations have been necessary. It is because of real factors in the economy which diverge between countries. If we are realistic about wanting the agenda of full


employment and growth, the move towards a single currency where devaluation is not an objective or mechanism should make us start to address the issues about why economies are diverging and get joint action on a European basis to achieve the objective of full employment and growth which we want to see. I know that my hon. Friend the Member for Dagenham does not agree with that point. My argument is that the only alternative is to have free-floating exchange rates, and let them follow the real factors.

Mr. Gould: It is not that I disagree with my hon. Friend. Of course, he is absolutely right that there are real performance indicators which matter in determining the true course of our economy. I disagree with his assumption that decisions on matters such as exchange rates, interest rates and monetary policy have no impact on the real performance matters. If we get those matters endemically wrong, as we have done over a long period, and then propose to entrench those mistakes in precisely the way proposed by the treaty, any hope that we have of securing a real economic convergence will be totally undermined.

Mr. Betts: The one issue about which I have real concern is the independence of the central bank. My hon. Friend knows my views about that matter. I cannot be eclectic about it because, although I believe that it will be possible politically to interpret some of the criteria in the treaty in a way which would be favourable to my arguments, I agree that the independence of the central bank is a major worry in that regard. Eventually, it will be found to be wanting and we shall have to readdress it in a fundamental way.

Mr. Simpson: In asking for a coherent alternative, does my hon. Friend accept that the whole package of proposals which such a coherent alternative would have to encompass would not address a single variable in the economy? It would make no sense simply to focus on the exchange rate mechanism as the only lever of an economy on which to reconstruct and achieve growth towards full employment.
If we take the package as a whole in terms of moving interest rates by wielding Government decisions about borrowing powers and Government debt, and if we subscribe to the terms of convergence, we shall fall into a trap. Those are precisely the constraints—

The Chairman: Order. As I have said several times during the night, interventions should be succinct and to the point. The hon. Gentleman's intervention is probably long enough.

Mr. Knapman: On a point of order, Mr. Morris. I seek your guidance on Standing Order No. 35 which says:
After a question has been proposed a Member rising in his place may claim to move, 'That the question be now put,' and, unless it shall appear to the chair that such motion is an abuse of the rules of the House, or an infringement of the rights of the minority, the question 'That the question be now put,' shall be put forthwith.
I draw that to your attention because in the past couple of hours—although we have heard only three speakers—some weighty legal points have been raised by the right hon. Member for Llanelli (Mr. Davies) and some equally valid ones have been raised by my hon. Friend the Member for Worcestershire, South (Mr. Spicer)—

The Chairman: Order. Those are hypothetical points to me. I call Mr. Betts.

Mr. Knapman: Am I not entitled to finish my point of order?

The Chairman: Order. I have ruled on that point of order which the hon. Gentleman raised, and I have called Mr. Betts.

Mr. Cash: Further to that point of order, Mr. Morris. Under Standing Order No. 35 and the reference to the rights of the minority, if only three speakers have spoken in the debate, and there was any question of anyone—

The Chairman: Order. The hon. Gentleman is right that so far three people have spoken, but that has been true of many debates. At no point have I accepted a closure motion after only three people have spoken.

Mr. Knapman: Further to that point of order, Mr. Morris.

The Chairman: No, I will not take any further points of order. I call Mr. Betts.

Mr. Betts: I am doing my best to remember the point that my hon. Friend—

The Chairman: I call Mr. Betts on the amendments.

Mr. Betts: I was trying to remember the point that was made in the intervention, Mr. Morris. My hon. Friend the Member for Nottingham, South (Mr. Simpson) said that exchange rate mechanisms were not the sole weapon in the armoury.

Mr. Simpson: May I refresh my hon. Friend's memory? I simply asked him—

The Chairman: Order. If the hon. Gentleman cannot remember the intervention, it is hard luck.

Mr. Betts: As I remember it, my hon. Friend said that exchange rate mechanisms were one weapon, but they should not be the only weapon to seek convergence between countries and rectify discrepancies between them. We must accept that if we move to a common currency, we shall remove the exchange rate as a mechanism for adjusting the economic performance of various countries. We shall lose one of the weapons in our armoury. That is one of the prices that we pay for that process. I would argue that it is a price worth paying for removing speculation.
Many people have said that they are either in favour of the treaty or against it, and that is the end of the story. I am not wholeheartedly in favour of the Maastricht treaty, although I believe that the general objectives set out in article 2 take us in the right direction. We can achieve that only if we remain a full member of the European Community. That is the only way in which we can achieve the objectives of investment growth and full employment.
If we accepted amendments that meant that the Government could not ratify the treaty, we would end up outside the European Community or, at best, we would become a second-class member of the Community. The treaty is far from perfect. I have tried to show that there are conflicts within it. There are differences of emphasis in different parts of the treaty. They range from the clear


acceptance in article 2 that the principles of employment are paramount, to article 105 in which, as my hon. Friends have rightly said, price stability clearly comes to the fore.
I recognise that that creates a degree of ambiguity. I have said that it is not for Opposition Members to justify or explain that. That is up to the Government. However, whatever the difficulties with the treaty, we must work to develop an agenda within the EC which gives primacy to the employment growth and investment criteria in article 2, whatever the constraints in later parts of the treaty. We should seek to resolve any potential conflicts in the treaty in favour of achieving employment growth and investment. That is why Opposition Members who are prepared to accept the treaty, imperfect as it is, have set ourselves a course that recognises some of the flaws, but also recognises that it is probably the best that we can achieve to set the agenda for growth in the 1990s which is so urgently needed.

Mr. Andrew Mitchell: I beg to move, That the Chairman do report Progress and ask leave to sit again.

Mr. Andrew F. Bennett: I understood that there was a tradition in the House that Members vote and speak in the same way. I understand that at 10 o'clock last night Liberal Democrat Members voted for us to continue our proceedings all night. They seem to have disappeared now. I should have thought that it was perfectly reasonable that if they had voted—

The Chairman: Order. The appearance or disappearance of hon. Members is certainly not a matter for the Chair. I call Mr. Bennett on a point of order.

Mr. Bennett: It is not a point of order.

The Chairman: I shall take a point of order from the hon. Member for Stafford (Mr. Cash) and then I shall come back to the hon. Gentleman.

Mr. Cash: The Liberals have gone, but there is an important amendment that they tabled which would have left out the United Kingdom protocol. It is extraordinary and outrageous that an amendment should be tabled in the name of the leader of the Liberal Democrat party and they are not even here—

11 am

The Chairman: Order. The hon. Gentleman is wearing a very bright tie this morning, but that still does not mean he can abuse the Chair by raising points of order that are totally bogus.

Mr. Bennett: rose—

The Chairman: I call the hon. Gentleman on a second point of order.

Mr. Bennett: It is not a point of order.

The Chairman: Let me clarify matters for the Committee. We are now on a debate on the motion that I report progress and ask leave to sit again. The scope of that debate, to which I am prepared to listen, is that it should be confined to whether the debate should continue. It has nothing to do with who was here in the middle of the night and who was not, or which party was here or who tabled which amendment. Before I call the hon. Member for Denton and Reddish (Mr. Bennett) to speak, are there any more points of order?

Mr. Bill Walker: On a point of order, Mr. Morris. Fortunately, you have already answered one aspect of ray point of order. Those of us who have sat through the night have admired the way in which you have handled things, and I mean that most sincerely. Will you tell the House whether the conduct of Members who move motions and then do not remain for them is borne in mind when the Chair is considering whether they should be called in future debates?

The Chairman: The Chair has many things to bear in mind in deciding who should speak. Mr. Bennett has the floor.

Mr. Bennett: I shall begin by drawing attention to the fact that last night hon. Members decided that it was a good idea for us to work from 10 o'clock at night right through until a few moments ago.
People outside the House will ask whether we are making the most logical use of our time. It seems odd that the Government should now seek to report progress rather than to continue. Most of my constituents would have found it much more logical for us to debate this issue between 10 o'clock in the morning and 5 o'clock at night rather than between 10 o'clock at night and 10 o'clock in the morning.

Mr. Cryer: Does my hon. Friend accept that reporting progress is a determination of whether these important issues that affect the entire nation should continue to be debated in the Chamber? Does my hon. Friend agree that the Government are moving progress not because they are concerned with the nation at large but because they have done a dirty deal with the Liberals and are trying to stick to it?

Mr. Bennett: I am sure that if we started talking about all the deals that have been done in the Corridors of this place, we would have a lot to debate and I also suspect that you would not be very happy about that, Mr. Morris.
I want to address the central question whether we are making sensible use of our time. I should have thought that it would have been perfectly reasonable for the Government to tell us their plans for the rest of the day. Will we have the farce that we now adjourn and do not return to this business until possibly 9 o'clock this evening; we then continue through the evening and at 10 o'clock some arrangement is made with the Liberals by which we either continue to debate crucial issues in the small hours of the morning or will we use a more sensible procedure that, having continued until 11 o'clock in the morning, we carry on?
My right hon. Friend the Member for Llanelli (Mr. Davies) asked some extremely important questions and I should like to hear some answers. It is extremely difficult to have a debate which is then interrupted and then to have to wait until possibly this evening, the small hours of the morning or Monday before we get the answers to the very important questions that my right hon. Friend posed. It is disgraceful that the Government cannot tell us specifically what they intend to do.

Dr. Godman: Is my hon. Friend aware that a number of us have been here for several hours and were hoping to speak in a continuing debate on the amendments? [Interruption.] One of my hon. Friends says that I look as


though I have been here all night. It is more than a matter of asking questions; it is a keenness to take part in the debate. So the debate should continue.

Mr. Bennett: I accept that point. My central concern is that very important questions were raised on this group of amendments about the future financial position of the country and they are questions that the House should address. It is ridiculous that, instead of addressing them at an important time of day, when people can rise to logical debate, the Government want to shuffle the debate off so that once again we end up with a debate late at night when hon. Members are less likely to be able to follow the arguments that have been put forward.
I appeal to the Government to tell us now what they intend to do. Do they intend to report progress now and ask leave to sit again tomorrow, which is, of course, today—one of the farces of parliamentary procedure—so that we will reach the wind-up to the debate some time late in the evening? Or is it their intention not to move the 10 o'clock motion tonight, so that we end up with a response to the debate, which was started at half-past seven this morning by my right hon. Friend the Member for Llanelli (Mr. Davies), at some point on Monday? One of my hon. Friends says "Tuesday". That is one of the difficulties of trying to remember which day it is, particularly when we are in the farcical position where people outside think that today is Thursday but inside the House it is Wednesday.

Mr. Cryer: Would my hon. Friend also bear in mind the fact that there is really no point in having a break now because we will not have, in a debate on Thursday—which it is outside, but it is still Wednesday in here—time to have Hansard printed so that we can read the speeches of the various Members who have spoken through the night? Would not the best way to proceed be to get the Government to join in this debate by saying that they will abandon the Bill completely and allow Hansard to be printed?

Dame Elaine Kellett-Bowman: On a point of order, Mr. Morris. The hon. Member is not addressing the Chair.

Mr. Cryer: On a point of order, Mr. Morris.

The Chairman: The sedentary point of order was correct: the hon. Gentleman should address the Chair, although I accept that he was getting a little carried away. I should be grateful if in future he would address the Chair.

Mr. Cryer: On a point of order, Mr. Morris. Naturally I will accept your guidance, but I was bringing matters of importance to the attention of the Committee. I should be grateful if you would tell some of the Tories, particularly the hon. Member for Lancaster (Dame E. Kellett-Bowman), not to shout from a sedentary position—something which, I am sorry to say, she does frequently.

Dame Elaine Kellett-Bowman: I was merely responding to the lamentable behaviour of the hon. Members opposite.

The Chairman: The hon. Member for Denton and Reddish had the floor.

Several hon. Members: rose—

Mr. Bennett: I have to start my speech before I can give way, but I will give way now.

Sir Trevor Skeet: I just want to raise one matter with the hon. Member. He has been sitting here all night, waiting to get into this debate. [HON. MEMBERS: "No, he has not."] We have had something of the order of 24 blocks of major amendments since we started the Maastricht debates; only three of them have been on economic affairs and all three have been discussed during the night. The debate on them has missed the newspapers. It has missed the ventilation that it should have had. It is important that those outside should know the exact position. Does the hon. Member agree?

Mr. Bennett: I very much agree. That is why I wanted to find out the Government's intentions for the rest of the day and that is what we are debating—whether we should report progress. Many people would like us to do so, but we do not want to if key economic answers are going to be given in the middle of the night. I certainly would have liked to have heard the Government's intentions for tomorrow—which is today.
My hon. Friend the Member for Bradford, South (Mr. Cryer) said that we could not read the speeches made during the debate. He said that we cannot read the most useful speech by my right hon. Friend the Member for Llanelli (Mr. Davies) because it is not in Hansard. I do not think that my hon. Friend is correct because I understand that the typescript of the spill-over session goes to the Library, once Hansard has completed it, so I think that my hon. Friend could read it there. If he did not hear that speech, I recommend it to him as it is worth while reading.
Some people outside the House feel that our speeches on Maastricht are simply filibusters, but I stress to my hon. Friend the Member for Bradford, South that, although the speech by my right hon. Friend the Member for Llanelli was long, every word was extremely important. Anyone outside this place who is under the misunderstanding that we are filibustering should take the trouble to read that speech. He would then be aware that my right hon. Friend raised important issues concerning the future economy of this country.

Mr. Cryer: Does my hon. Friend accept that, although he might be right technically that a version of Hansard is available in the Library shortly after the debate has finished, in reality every hon. Member has the right to receive Hansard and to read it.

Dame Elaine Kellett-Bowman: Order.

Mr. Cryer: The fact that one copy might be available in the Library is no substitute for the right of 651 Members to receive Hansard.

Dame Elaine Kellett-Bowman: Order.

Mr. Cryer: I should be grateful if my hon. Friend could comment on that, although I realise that there are grave difficulties because of the continuing interruptions of the hon. Member for Lancaster (Dame E. Kellett-Bowman), who seems to be behaving very badly so early in the morning.

Dame Elaine Kellett-Bowman: On a point of order, Mr. Morris. Would you please assure the rather obstreperous Member for Bradford, South (Mr. Cryer) that I am drawing perfectly proper points of order to the notice of


the Chair? That includes the point of order that hon. Members are coming into the Chamber and walking upright in front of those Members who are speaking, thus breaking their eye line with the Chair.

The Chairman: The hon. Lady is quite right and I take this opportunity to point out to all hon. Members that the incidence of hon. Members interfering in the sightline between the Chair and the hon. Member who is speaking has increased and that that practice should cease. That has occurred on both sides of the Chamber, although it has happened only on one side this morning. Also, may I say that the hon. Lady looks to me to be in the peak of fitness this morning.

Mr. Austin Mitchell: On a point of order, Mr. Morris. Could you confirm that the manner of interjection by the hon. Member for Lancaster (Dame E. Kellett-Bowman) was not to raise a point of order. She did not say, "On a point of order." She yelled "Order" from a sedentary position, as if the Chairman of this Committee had turned into some kind of street yodeller on the other side of the Chamber.

The Chairman: Order. That is a bogus point of order.

Mr. Bennett: Before all those interruptions, I was trying to explain what I believe to be the central matter for the Committee. We should debate the Bill in an orderly fashion and the Government should set out what is happening clearly.
I heard the important speech of my right hon. Friend the Member for Llanelli, but I have not heard speeches from Liberal Members because their amendments were apparently not included in this group. We have also not had the opportunity to hear from my hon. Friends on the Opposition Front Bench or from the Minister.
I want to know whether the Government intend to report progress and ask leave to sit again this afternoon. We understand that there is to be a statement on coal this afternoon, as well as business questions, so the key answers to our economic debate will take place between 6 and 7 o'clock this evening and may go on past 10 o'clock. The key answers to future questions of unemployment which affect my constituency and elsewhere in the country could be debated in the small hours of the morning again. I am sure that the public will not understand that.

Mr. Hain: My hon. Friend makes a valuable point. He might want to consider the fact that we have not had from the Government any indication as to when they will close the debate on the vital issue of the economic character of Europe.

The Chairman: Order.

Mr. Hain: Until we do, we shall not know—

The Chairman: Order.

Mr. Hain: —whether the issues are being—

The Chairman: Order. The hon. Gentleman is getting into the habit of continuing his speech after I have called him to order. Let me make it quite clear to him that I decide when there should be a closure.

Mr. Bennett: It is very worrying that the Government have not told us what their plans are. I shall happily give way to the Minister if he is prepared to tell us what we are to do for the rest of the day. It is important that the hon. Members who move amendments be present to hear the remainder of the debate. Failure by the Government to give us some indication of their intentions will amount to extreme discourtesy to the Committee.
My hon. Friend the Member for Bradford, South (Mr. Cryer) has made a point about the availability of Hansard. It is farcical that we should have to wait 24 hours for the Official Report, as an electronic system of printing is being used. Hansard should be available to hon. Members electronically within an hour or two. [Interruption.] The hon. Member for Wirral, South (Mr. Porter) is complaining from a sedentary position. No doubt he was not here at half-past seven this morning.

Mr. Barry Porter: As you, Mr. Morris, have said, the decision about a vote is a matter for you. Actually, I believe that it is about time we had one. People in the Galleries and people outside deserve better. Maastricht has not been mentioned in the last 45 minutes.

Mr. Bennett: I shall not question the hon. Gentleman very closely about the speech of my right hon. Friend the Member for Llanelli. I am sure that if he was present for that speech he would agree that it was very important and contained many questions that demand answers from the Government. But the answers should be given at prime time in the Chamber. I hope that, in this short debate on the progress motion, the Government will tell us what is to happen.

Mrs. Gorman: rose—

Mr. Bennett: I shall give way reluctantly.

Mrs. Gorman: Members who are not here in the middle of the night are missing not only important subject matter but important speeches. The people about whom I am thinking may be in the minority in this debate, but my hon. Friend the Member for Milton Keynes, South-West (M r. Legg) has sat through 17 days of debate as he has very important material to contribute. He has not yet been called and he may be called in the middle of the night, resulting in the virtual loss of his very important speech. I hope that his material will not be wasted in that way.

Mr. Bennett: I accept that point. The hon. Member for Milton Keynes, South-West (Mr. Legg) is one of the Members who questioned my right hon. Friend the Member for Llanelli.
The next time the Government decide to report progress in the middle of the morning—

Mr. Knapman: Will the hon. Gentleman give way?

Mr. Bennett: Yes, reluctantly.

Mr. Knapman: The hon. Gentleman should be making his points to the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston). It is rumoured that there is to be an important Liberal party conference—if that is not a contradiction in terms—tomorrow. The hon. Gentleman might benefit from asking the Liberal Member whether he


has been given any undertaking with regard to business later today. In that way, the matter might be speedily resolved.

Mr. Bennett: I would not dream of asking the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) what deals he has done behind closed doors. I said at the beginning of my speech that if we were to spend all our time in the Chamber debating deals done behind the scenes we should make very little progress. It was unfair of the Liberal party to vote in favour of holding a key economic debate in the middle of the night, when most of its members intended to go home. However, I am not surprised, as I have on far too many occasions witnessed their opportunism.
Will the Government please tell us how this debate is to be continued rationally? When shall we get answers to the key economic questions put by my right hon. Friend the Member for Llanelli?

Mr. Livingstone: I shall start by saying how much all of us respect the fair way in which you, Mr. Morris, have conducted business today. You look so fresh and entertaining at this time of the day, having been up through the night, that I wonder what you are on. I would not mind some of it.
The past 24 hours have been an absolute travesty. The most important decisions that will ever come before the House of Commons—which will strip the British people of their major economic rights and their ability to exercise them via the democratic will of Parliament—have been pushed through in the dead of night. It is known full well that the media has largely closed down. The exercise has been conducted for the benefit of the Government, who wish to do their sordid business with the minimum of atttention.
The Government have had the despicable and disgraceful co-operation of the Liberal Democrats, who have disappeared so far up the Tory fundament that the soles of their feet barely show at present. The Liberal Democrats will be careering round Newbury in the weeks to come, pimping and prostituting themselves as the defenders of democracy, having sat through the middle of the night and allowed the Government to push through the legislation. Captain Mannering will be popping up and down Newbury telling all and sundry—

The Chairman: Order. Newbury is not relevant to the debate.

Mr. Livingstone: I was hoping that we could continue the debate until the Newbury by-election.
We are in the midst of a debate about the European Monetary Institute, the forerunner of the central bank, and suddenly the Government want to make progress. Is that perhaps because the journalists are now reporting our business?

Mr. Cash: Is the hon. Gentleman aware that the leader of the Liberal Democrats has tabled an amendment—which should be discussed in the course of our proceedings—to take out what is described as the jewel in the crown of the British negotiations at Maastricht: the opt-out on economic and monetary union? That amendment is actually in the name of the leader—

The Chairman: Order. That matter has nothing to do with the present debate.

Mr. Livingstone: I think that the hon. Gentleman was referring to amendment No. 400, which forms part of the debate towards which we are moving—

The Chairman: That was the debate that we were having. We are now debating whether that debate should continue. We are not discussing the content of that debate.

Mr. Cash: On a point of order, Mr. Morris. How can we be precluded from discussing the content of amendments that have been selected by you when we are debating whether or not we are to be allowed to discuss the motion before us? It is almost impossible to discuss one without the other.

The Chairman: It is clear that we are debating whether to report progress, not the content of individual amendments.

Mr. Knapman: Further to that point of order, Mr. Morris. Previously, a closure motion has always been granted immediately. Therefore, will you reconsider the answer that you gave to my hon. Friend the Member for Stafford (Mr. Cash)?

The Chairman: We can discuss the amendments when we return to them. We are now debating the sole issue of whether to report progress.

Mr. Livingstone: If we report progressnow, what will we have to report? We are halfway through the debate and have not had the vital votes. The Government have not replied to most of the telling questions that have been asked. Many vital issues have been raised to which answers have not been forthcoming. What will the Government do to protect the budget deficit? It has been made clear that if we were to proceed with the treaty before such issues were resolved and the treaty were in operation today, we would now have to move into emergency session to make cuts of £19 billion. How can we report progress when we have not received an answer from the Government on how they would try to square the horrendous circle?
I assume that at some stage the Home Secretary will come to the House to make a statement on the disturbances in Yeovil which are currently taking place. People who feel betrayed are surging on to the streets to demand the resignation of their local Member of Parliament. The news is coming over on the tapes as I speak. There is rioting in Yeovil as ordinary people take to the streets with placards saying, "Paddy, you rat, we want you out".
How can we possibly stop the business until we have had a statement from the Home Secretary? All these matters should be placed before us. We have sat through a disgraceful day for British democracy and now the Government want to shuffle it to one side by closing the debate. Some hon. Members have been here all night. I confess that I was not because I popped home for five hours of shuteye. When I returned I found that in my absence we were committed to a European central bank. The legislation had been pushed through in the small hours as a result of dirty work with the Liberal Democrats who went sliding off to conduct their squalid deals. No doubt they will vote to report progress. Will we have a report on the deals with the Liberal Democrats? Will that be included in the progress report?
In this retrograde move the British people have seen the first major step towards taking away their right to determine our interest rates and the exchange rate for the pound. I was disturbed to hear some of my Front-Bench spokesmen make a fundamental error. I am sure that the Government would want to cover that up: that is why they want to make progress. When I raised the issue of the exchange rate, I was told that ECOFIN would decide the exchange rate of the ecu against the dollar and the yen. How is that determined? The exchange rate of one currency against another is determined by the balance of trade and by the interest rate, which would be set by the central bank. That would effectively determine the exchange rate of the ecu.
No one could possibly sustain an exchange rate that did not reflect the real interest rates vis-à-vis our major competitor currencies. That point has not been answered at all. The Committee is being seriously misled, I am sure inadvertently, and it is being done in the dead of night. It is ridiculous that technically it is still Wednesday, although the rest of the world is already moving on to Thursday. That is absolute nonsense.

Mr. Cash: Does the hon. Gentleman know that the Chancellor of the Exchequer has not taken any part in our proceedings on the most fundamental issue affecting the future of the British economy, monetary affairs, currency, the exchange rate mechanism and black Wednesday? The whole saga is wrapped up in the debate, but the Chancellor has not been here. A junior Minister, the Financial Secretary to the Treasury, has been deputed to discuss all those matters. The right hon. Member for Llanelli (Mr. Davies) put to him important legal points and he could not answer any of them.

Mr. Livingstone: The hon. Member for Stafford (Mr. Cash) makes a valuable point about the absence of the Chancellor, who has had a bad time lately. From black Wednesday he has had a bad run and the Budget was not well received. We cannot make progress until the Chancellor has attended to put his views. Frankly, I am sure that he does not believe in most of this old nonsense. That is why he was singing in the bath when we were forced out of the exchange rate mechanism.

Mr. Skinner: I take great exception to my hon. Friend's statement that the Chancellor of the Exchequer has had a bad time. The country has had a bad time. The Chancellor of the Exchequer has had a great time. He has been living off the hacks of the taxpayer. He has been stopping legal aid for everybody else in Britain and has been picking it up for himself because he got involved with Miss Whiplash and could not get rid of her. He is spending all that money at Threshers, at different places, and his Access card is not in credit. The country is in a mess, the wheels have dropped off the economy and what is he doing? He is singing in the bath. My hon. Friend should rephrase what he has just said.

Mr. Livingstone: It is always refreshing to be reminded by my hon. Friend the Member for Bolsover (Mr. Skinner) of the real class analysis of these matters. I apologise for my slip into moderation. It is a complete travesty that the Chancellor has not been here to present the issues. We know from private briefings to the press that he is clearly not happy and that he thinks it was a mistake to slip into the exchange rate mechanism which, of course, is the first

stage of monetary union and the core of the treaty that we have been debating. I saw the Chancellor on "The Frost Interview" on Sunday morning. I was appearing on it myself, to review the morning newspapers. The Chancellor looked much happier outside the exchange rate mechanism than he did when he was in it.
As to the consequences, there were no answers from members of either Front Bench. The real rejection of the Maastricht treaty was cast by voters in France last Sunday, who violently rejected a Government who had gone along with precisely the kind of proposals that were debated tonight.

The Chairman: Order. The hon. Gentleman is becoming too inventive. We must remain in the United Kingdom.

Mr. Livingstone: It would be good if we could, because once the treaty goes through there will not be much of the United Kingdom left.

Mr. Cryer: Will my hon. Friend dwell on the difficulties that would be created by stopping the proceedings now? My right hon. Friend the Member for Llanelli made an excellent speech in which he outlined the economic difficulties; and the establishment of the central bank was also debated. At this point, we need the Chancellor of the Exchequer to come to the Committee to make a response. We do not want to hear from a junior Minister who cannot say anything anyway and who is simply told to keep in line. We should continue and receive a response from the Chancellor—particularly to the debate initiated by my right hon. Friend the Member for Llanelli.

Mr. Livingstone: It was not just the economic elements of my right hon. Friend's speech that were striking, but the legal content. Once the treaty goes through, it will not be us who interpret it but judges and European judges. It is all very well Conservative Members being dragooned by their Whips to pass this and that, but they are leaving interpretation of the treaty to judges of a court over which we shall have no influence. What response has been made to that point?
It does not pay respect to the dignity with which you, Mr. Morris, have conducted these proceedings that only junior Ministers have been in attendance rather than the Chancellor of the Exchequer. The whole nation will join me in applauding the way in which you, Mr. Morris, have conducted the business of the Committee, which has been very difficult at times.

Mr. Chisholm: Having attended the debate since 6 o'clock last night, I left the Chamber for an hour to catch up with some telephone calls and letters. When I returned, I was appalled to learn that the debate was to be closed. Are the Government interested only in debating key elements of the treaty during the hours of darkness?

The Chairman: Order. The debate has not been closed.

Mr. Chisholm: We want to keep the debate going and I take it that that is the subject of my hon. Friend's remarks.

The Chairman: Order. There is no closure of the debate—just a temporary suspension. The debate will resume in due course.

Mr. Chisholm: It is strange that the Government should want to stop now that we are in the hours of daylight, when they made members of the Committee sit during the night to debate the very heart of the treaty. That was an appalling thing to do. Two important groups of amendments were dealt with by collusion with the Liberal Democrats when many right hon. and hon. Members were not present and others were half-asleep. The least that we can expect is for the Chancellor to come to the Committee to answer the crucial points made by my right hon. Friend the Member for Llanelli (Mr. Davies), who described all the actions that the Government would have to take in stage 2. The junior Minister could not give a reply. We must know what stage 2 will involve in terms of inflation, exchange rates, and so on.

Mr. Livingstone: My hon. Friend makes valid points. I am surprised that no Minister has come to the Dispatch Box to answer. Reporting progress at this stage is like a surgeon performing open-heart surgery cutting open the chest, getting his knife in the heart muscle, and then saying "Shall we stop to report progress?" We do not know what the Government are doing, where they are going, or what they will be sewing up—although clearly they sewed something up with the Liberal Democrats.

Mr. Cryer: My right hon. Friend the Member for Llanelli gave us, in addition to his great Treasury experience, the benefit of his legal knowledge. The certain way to proceed would be for the Attorney-General to come to the Committee. From experience, we cannot depend on any other Minister properly to interpret the legal position. My hon. Friend the Member for Brent, East (Mr. Livingstone) will recall that the Minister of State, the right hon. Member for Watford (Mr. Garel-Jones), gave one interpretation and the Attorney-General gave another, yet they claim that it is all so simple and straightforward. It is vital that the Attorney-General attends to respond to the points clearly made by my right hon. Friend the Member for Llanelli.

Mr. Livingstone: In particular, the Government gave no clear guidance on the point made by my right hon. Friend the Member for Llanelli about what lay in store for us in the move towards an independent central bank. Various other Opposition Members made key points. What we are now debating reverses all that was achieved in the great nationalisation of the Bank of England in 1946; it is based on an absence of serious discussion and on half-baked advice provided by junior Ministers whose words have been completely unconvincing. One of the major achievements of the post-war Labour Government has been unravelled in the middle of the night. We have had no serious debate and no honest answers. I do not think that the Government have worked it out.

Mr. Marlow: I am sorry to return to something that the hon. Gentleman said a few moments ago. He said that it was vital for the Chancellor of the Exchequer to come and respond to the debate. I do not whether the hon. Gentleman was here at the time, but my hon. Friend the Financial Secretary talked earlier about article 107, which says that Governments cannot do anything to influence the European system of central banks. The House of Commons will be able to debate issues, but the Government will not be able to say anything. Surely it is worth my right hon. Friend the Chancellor's coming here

during the debate on monetary union: if he does not, the only thing that he will have left to say afterwards is goodbye, because the chance will be gone.

Mr. Livingstone: The hon. Gentleman has referred to perhaps the most serious and threatening of all the Maastricht proposals. Not only are we creating the independent European central bank that we have been discussing; not only are its appointees appointed for a single term of seven years—as there is no prospect of their being given a second term, they are free to do what they wish without accountability; but, in voting for the treaty, we waive our rights to influence them. At least the Bundesbank currently comes under pressure from politicians and the Federal Reserve Bank comes under pressure from the President. We have been asked to report progress on a proposal that we waive our rights to exercise similar restraints.

Mr. Rowlands: Is not article 108 equally significant to the sovereignty of the House? If we accept that article, we bind the future legislation of the House of Commons in regard to the statutes of the revised Bank of England. We would have to legislate in strict accordance with the statutes of the European central bank. Not only are we losing the rights of independence; we are losing the right to legislate on our bank in the way that we would wish.

Mr. Livingstone: And, even worse, Mr. Morris—

The Chairman: Even worse, yes. I anticipate the hon. Gentleman. We are not debating the sovereignty of Parliament; we are discussing whether the debate should continue and, if so, why it should continue.

Mr. Livingstone: I consider it vital for the debate to continue, Mr. Morris, so that we can continue to explore—

Mr. Cryer: On a point of order, Mr. Morris. I hate to draw your attention again to the hon. Member for Lancaster, but I understand that she is reading a newspaper. As she is very much concerned with our procedures, I thought that I should help her by informing her, through you, that that is not allowed, even in the Gallery.

The Chairman: The hon. Lady is beyond the Bar, but not in the Gallery.

Dame Elaine Kellett-Bowman: On a point of order, Mr. Morris. May I draw your attention to the lamentable lack of knowledge of the rules that has been demonstrated by the hon. Member for Bradford, South (Mr. Cryer)? Of course, I could not hear what he said, because I was outside the Chamber.

The Chairman: If the hon. Member for Bradford, South (Mr. Cryer) wishes to engage in a private conversation with the hon. Member for Lancaster (Dame E. Kellett-Bowman), I suggest that he goes and buys her a drink.

Mr. Livingstone: I hope that I can remember what I was going to say.
How can we report progress when the points that we have made have not been answered? We have had tremendous assistance from the Opposition Front Bench: I have listened to our leading spokespeople trying to explain the Government's policy, often much more clearly


than Ministers and, seemingly, often with much greater agreement than can be seen on the Conservative Benches. Ultimately, however, these remain matters of opinion.
We need the Chancellor and senior Law Officers here to give definitive rulings on the Bill. What would be the impact on the Chancellor if the Bill were passed and we found that the independence of our own central bank were adversely affected? Appointees to the national central banks will serve a five-year term, but we have received no assurance that the system could not be abused politically. Could an outgoing Government stack the board with people on five-year terms so that an incoming Government would be stuck with them?
It is interesting that the hon. Member for Lancaster (Dame E. Kellett-Bowman) was reading a newspaper beyond the Bar of the House. She was most probably looking for an account of the debate, but she will not find it because the key issues were decided after the press had gone to print. They will have to compete with today's news. How much of the debate, which should be reported to the British people, will be lost because of momentous events in Russia and elsewhere in the world? The debate should be held in prime time. We should ensure—

Mr. Barry Porter: On a point of order, Mr. Morris. I am seeking some information. I am listening with great interest and some amusement to the hon. Member for Brent, East (Mr. Livingstone) and with less interest and amusement to the Cryer-Skinner axis. How long may the debate on the motion to report progress continue? It seems that some members of the Opposition are trying to prolong the debate for no particular reason.

The Chairman: That is a judgment for the Chair.

Mr. Livingstone: It is certainly no part of my plan to prolong the debate, and I make that absolutely clear. I am prepared to say what I want: I want some honest answers. I should be prepared to sit down immediately if we could see the Chancellor's happy form wandering through. We must be told what deals have been done. Is making progress something that has been agreed with the Liberal Democrats and the Welsh nationalists, who were all in the same Lobby earlier? We want to know.

Mr. Kevin Hughes: The Chancellor will not come walking through because he is probably too busy in a Cabinet meeting, deciding how many pits to close.

Mr. Livingstone: It is extremely worrying. How will reporting progress affect the prospect for proper cross-examination of Tarzan later today when he tries to close what remains of the mining industry? I cannot remember his title—is it the President of the Board of Trade, el presidente, lord protector, or whatever he chooses to be known as? The debate must be properly concluded. It would be an insult to the British people if, after a long debate, most of which has taken place when the Galleries were empty because who will come to sit here—

The Chairman: Order. The hon. Gentleman knows the rules of the House.

Mr. Livingstone: Nobody else is here but us little mices. The reality is—

The Chairman: Order. The hon. Gentleman's little mouse was in bed, if I heard him correctly earlier.

Mr. Livingstone: Only for five hours, Mr. Morris. I feel that I could have done with another five hours.

Mr. Chisholm: Some of us have not slept at all because—I say this genuinely—we have been waiting for the Minister to reply to the debate. The group of amendments was brilliantly introduced by my right hon. Friend the Member for Llanelli (Mr. Davies), who went through the treaty in a most illuminating way. Anyone who heard his speech will agree with that. He opened up the issue of stage 2 of the treaty. We are waiting for a Minister, preferably the Chancellor, to reply to the many points that my right hon. Friend raised.
Some of us believe that the Chancellor and other members of the Government have been trying to pull the wool over their Back Benchers' eyes to gain their votes without telling them the truth about what is involved in stage 2 and how it affects exchange rate controls and other controls. As my right hon. Friend said, there is a seamless web from stage 2 to stage 3. That aspect of the debate must be dealt with. I have gone without sleep for 36 hours to wait for a reply and I shall not sleep happily until I have heard from a Treasury spokesman.

Mr. Livingstone: I seldom sleep happily when I have heard a Front-Bench Treasury spokesperson speak on any subject.
The Committee decided the way in which we should consider the legislation. Under your guidance, Mr. Morris, the various amendments were arranged into coherent groups. Some of us felt that we should simply start with one amendment and work our way through to the end and perhaps still be here in the year 2000. But you, in your wisdom, Mr. Morris, grouped the amendments. We are now being asked to break off the debate before we have been able seriously to consider the totality of what you thought should be examined together.
For instance, we have not discussed amendment No. 400 and before we report progress we should do so. We have not really discussed in any detail amendment No. 210, tabled by the hon. Member for Stafford (Mr. Cash), which would have tremendous implications for exchange rate policy. Such matters have a dramatic impact on the earlier stages of the debate. It is nonsense to try to shear the debate in half. We cannot report progress halfway through surgery; we should complete the surgery.

Mr. Allan Rogers: My hon. Friend has been castigating the Liberal Democrats heavily for their secret deal and the way in which they have cosied up with the Government to get this important business through. It has been discussed through the night and perhaps now it will not receive the publicity that my hon. Friend says that it should. Does my hon. Friend realise that the Welsh National party took part in the deal, too—[HON. MEMBERS: "And the Scots."] Last night the Scottish nationalists voted for the closure, but the Welsh nationalists, as part of the deal that they struck three weeks ago on the Committee of the Regions, are continuing to cosy up with the Government, and they have driven through provisions of vital consequence to Wales to be discussed in the middle of the night.

Mr. Livingstone: I share my hon. Friend's worries. Those proceedings seem to show all the worst aspects of politics. Deals have been done out of sight of the public and out of sight of the Chair, in the crooks and crannies of this place—[HON. MEMBERS: "Nooks."]—I mean, the nooks and crannies—in the nooks by the crooks.

Mr. Bill Walker: I happen to think that the Government were right to move the motion and I shall tell the Committee why. Those of us who, unlike the hon. Member for Brent, East (Mr. Livingstone), have been here all night believe that we should have the opportunity to continue the debate, to which we wish to contribute, with people who are awake and listening. I wish to contribute because these matters will considerably affect Scotland and, indeed, the constitution of the United Kingdom and this unitary Parliament in a way that could lead to the break-up of the United Kingdom. With all due respect to the hon. Gentleman, he should know that the Ministers have sat through the entire debate. The right time to continue it will be when we are all a bit fresher and they have had the opportunity to recharge their batteries and the debate can be scheduled at a time when I hope that it will still catch the attention of the media.

Mr. Livingstone: The hon. Gentleman offers a sensible opinion. If we were being offered a serious debate which would start and finish at a reasonable time, that would unite the Committee. But what happens is that we do not know what will happen until 10 o'clock, and then someone may jump up to move a motion; perhaps we will debate through the night and perhaps we will not. That is not a serious way in which to conduct business. We cannot report progress when people are staggering around. Not everyone has your resilience, Mr. Morris. Many of us feel a lot more ragged at the edges, even though we may have managed to get a bit of shuteye. I dread to think about the poor people who have been up all through the night, such as some of my right hon. and hon. Friends, who are now looking quite dragged.

Mr. Bennett: My hon. Friend and I have taken up quite a bit of time this morning. Does he agree that the whole exercise could have been stopped if a Minister had told us what the Government intended to do for the rest of the day? If they intended to return to the Bill, with the Chancellor making a statement at the beginning of a debate that would end at 10 o'clock, that would be a rational way to behave. It is most objectionable—

Mr. David Davis: rose in this place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 276, Noes 204.

Division No. 210]
[11.48 am


AYES


Adley, Robert
Baker, Nicholas (Dorset North)


Ainsworth, Peter (East Surrey)
Baldry, Tony


Aitken, Jonathan
Banks, Matthew (Southport)


Alexander, Richard
Banks, Robert (Harrogate)


Alison, Rt Hon Michael (Selby)
Bates, Michael


Alton, David
Batiste, Spencer


Amess, David
Bellingham, Henry


Ancram, Michael
Beresford, Sir Paul


Arbuthnot, James
Blackburn, Dr John G.


Arnold, Jacques (Gravesham)
Booth, Hartley


Ashby, David
Boswell, Tim


Ashdown, Rt Hon Paddy
Bottomley, Peter (Eltham)


Atkinson, Peter (Hexham)
Bottomley, Rt Hon Virginia





Bowden, Andrew
Hampson, Dr Keith


Brandreth, Gyles
Hanley, Jeremy


Brazier, Julian
Hannam, Sir John


Bright, Graham
Harris, David


Brooke, Rt Hon Peter
Haselhurst, Alan


Brown, M. (Brigg & Cl'thorpes)
Hawkins, Nick


Browning, Mrs. Angela
Hayes, Jerry


Bruce, Ian (S Dorset)
Heald, Oliver


Bruce, Malcolm (Gordon)
Heath, Rt Hon Sir Edward


Burns, Simon
Heathcoat-Amory, David


Burt, Alistair
Hendry, Charles


Butterfill, John
Heseltine, Rt Hon Michael


Campbell, Menzies (Fife NE)
Hicks, Robert


Carlisle, Kenneth (Lincoln)
Higgins, Rt Hon Sir Terence L.


Carrington, Matthew
Hill, James (Southampton Test)


Channon, Rt Hon Paul
Hogg, Rt Hon Douglas (G'tham)


Chapman, Sydney
Horam, John


Churchill, Mr
Hordern, Rt Hon Sir Peter


Clarke, Rt Hon Kenneth (Ruclif)
Howard, Rt Hon Michael


Clifton-Brown, Geoffrey
Howarth, Alan (Strat'rd-on-A)


Coe, Sebastian
Hughes Robert G. (Harrow W)


Congdon, David
Hughes, Simon (Southwark)


Conway, Derek
Hunt, Rt Hon David (Wirral W)


Coombs, Anthony (Wyre For'st)
Hunt, Sir John (Ravensbourne)


Coombs, Simon (Swindon)
Hunter, Andrew


Cope, Rt Hon Sir John
Jack, Michael


Cormack, Patrick
Jackson, Robert (Wantage)


Couchman, James
Johnson Smith, Sir Geoffrey


Curry, David (Skipton & Ripon)
Johnston, Sir Russell


Davis, David (Boothferry)
Jones, Gwilym (Cardiff N)


Day, Stephen
Jones, Ieuan Wyn (Ynys Môn)


Deva, Nirj Joseph
Jones, Robert B. (W Hertfdshr)


Devlin, Tim
Jopling, Rt Hon Michael


Dickens, Geoffrey
Kellett-Bowman, Dame Elaine


Dicks, Terry
Key, Robert


Dorrell, Stephen
King, Rt Hon Tom


Douglas-Hamilton, Lord James
Kirkhope, Timothy


Dover, Den
Kirkwood, Archy


Duncan, Alan
Knight, Mrs Angela (Erewash)


Duncan-Smith, Iain
Knight, Greg (Derby N)


Dunn, Bob
Knight, Dame Jill (Bir'm E'st'n)


Durant, Sir Anthony
Knox, David


Eggar, Tim
Kynoch, George (Kincardine)


Elletson, Harold
Lait, Mrs Jacqui


Emery, Rt Hon Sir Peter
Lamont, Rt Hon Norman


Evans, David (Welwyn Hatfield)
Leigh, Edward


Evans, Jonathan (Brecon)
Lennox-Boyd, Mark


Evans, Nigel (Ribble Valley)
Lester, Jim (Broxtowe)


Evans, Roger (Monmouth)
Lidington, David


Evennett, David
Lilley, Rt Hon Peter


Faber, David
Lloyd, Peter (Fareham)


Fabricant, Michael
Llwyd, Elfyn


Fenner, Dame Peggy
Lord, Michael


Field, Barry (Isle of Wight)
Luff, Peter


Fishburn, Dudley
Lyell, Rt Hon Sir Nicholas


Forsyth, Michael (Stirling)
MacGregor, Rt Hon John


Forth, Eric
MacKay, Andrew


Foster, Don (Bath)
Maclean, David


Fowler, Rt Hon Sir Norman
McLoughlin, Patrick


Fox, Dr Liam (Woodspring)
Madel, David


Fox, Sir Marcus (Shipley)
Maitland, Lady Olga


Freeman, Roger
Major, Rt Hon John


Gale, Roger
Malone, Gerald


Gallie, Phil
Mans, Keith


Garel-Jones, Rt Hon Tristan
Marland, Paul


Garnier, Edward
Marlow, Tony


Gillan, Cheryl
Marshall, John (Hendon S)


Goodlad, Rt Hon Alastair
Marshall, Sir Michael (Arundel)


Goodson-Wickes, Dr Charles
Martin, David (Portsmouth S)


Gorman, Mrs Teresa
Mates, Michael


Gorst, John
Mawhinney, Dr Brian


Grant, Sir Anthony (Cambs SW)
Mayhew, Rt Hon Sir Patrick


Greenway, Harry (Ealing N)
Mellor, Rt Hon David


Greenway, John (Ryedale)
Merchant, Piers


Griffiths, Peter (Portsmouth, N)
Michie, Mrs Ray (Argyll Bute)


Grylls, Sir Michael
Milligan, Stephen


Gummer, Rt Hon John Selwyn
Mitchell, Andrew (Gedling)


Hague, William
Mitchell, Sir David (Hants NW)


Hamilton, Rt Hon Archie (Epsom)
Monro, Sir Hector


Hamilton, Neil (Tatton)
Montgomery, Sir Fergus






Moss, Malcolm
Spink, Dr Robert


Needham, Richard
Spring, Richard


Nelson, Anthony
Sproat, Iain


Neubert, Sir Michael
Squire, Robin (Hornchurch)


Newton, Rt Hon Tony
Stanley, Rt Hon Sir John


Nicholls, Patrick
Steen, Anthony


Nicholson, David (Taunton)
Stephen, Michael


Nicholson, Emma (Devon West)
Stewart, Allan


Norris, Steve
Streeter, Gary


Onslow, Rt Hon Sir Cranley
Sumberg, David


Ottaway, Richard
Sweeney, Walter


Page, Richard
Sykes, John


Paice, James
Tapsell, Sir Peter


Patnick, Irvine
Taylor, John M. (Solihull)


Patten, Rt Hon John
Temple-Morris, Peter


Pattie, Rt Hon Sir Geoffrey
Thomason, Roy


Pawsey, James
Thompson, Sir Donald (C'er V)


Peacock, Mrs Elizabeth
Thornton, Sir Malcolm


Pickles, Eric
Thurnham, Peter


Porter, Barry (Wirral S)
Townsend, Cyril D. (Bexl'yh'th)


Portillo, Rt Hon Michael
Tracey, Richard


Powell, William (Corby)
Tredinnick, David


Rathbone, Tim
Trotter, Neville


Redwood, John
Twinn, Dr Ian


Renton, Rt Hon Tim
Tyler, Paul


Richards, Rod
Vaughan, Sir Gerard


Riddick, Graham
Waldegrave, Rt Hon William


Rifkind, Rt Hon. Malcolm
Walden, George


Robathan, Andrew
Walker, Bill (N Tayside)


Roberts, Rt Hon Sir Wyn
Waller, Gary


Robertson, Raymond (Ab'd'n S)
Wardle, Charles (Bexhill)


Robinson, Mark (Somerton)
Waterson, Nigel


Rowe, Andrew (Mid Kent)
Wells, Bowen


Rumbold, Rt Hon Dame Angela
Wheeler, Rt Hon Sir John


Ryder, Rt Hon Richard
Whitney, Ray


Sackville, Tom
Whittingdale, John


Sainsbury, Rt Hon Tim
Widdecombe, Ann


Scott, Rt Hon Nicholas
Wiggin, Sir Jerry


Shaw, David (Dover)
Wigley, Dafydd


Shaw, Sir Giles (Pudsey)
Willetts, David


Shephard, Rt Hon Gillian
Wolfson, Mark


Shepherd, Colin (Hereford)
Yeo, Tim


Shersby, Michael
Young, Sir George (Acton)


Smith, Tim (Beaconsfield)



Soames, Nicholas
Tellers for the Ayes:


Spencer, Sir Derek
Mr. David Lightbown and


Spicer, Sir James (W Dorset)
Mr. Timothy Wood.


NOES


Abbott, Ms Diane
Clapham, Michael


Adams, Mrs Irene
Clark, Dr David (South Shields)


Ainger, Nick
Clarke, Eric (Midlothian)


Ainsworth, Robert (Cov'try NE)
Clarke, Tom (Monklands W)


Allen, Graham
Clelland, David


Anderson, Donald (Swansea E)
Clwyd, Mrs Ann


Anderson, Ms Janet (Ros'dale)
Cohen, Harry


Armstrong, Hilary
Connarty, Michael


Barnes, Harry
Corbett, Robin


Barron, Kevin
Corbyn, Jeremy


Battle, John
Corston, Ms Jean


Bayley, Hugh
Cousins, Jim


Beckett, Rt Hon Margaret
Cryer, Bob


Benn, Rt Hon Tony
Cummings, John


Betts, Clive
Cunliffe, Lawrence


Blair, Tony
Cunningham, Jim (Covy SE)


Blunkett, David
Darling, Alistair


Boyce, Jimmy
Davidson, Ian


Boyes, Roland
Davies, Rt Hon Denzil (Llanelli)


Bradley, Keith
Davies, Ron (Caerphilly)


Bray, Dr Jeremy
Davis, Terry (B'ham, H'dge H'l)


Brown, Gordon (Dunfermline E)
Denham, John


Burden, Richard
Dewar, Donald


Byers, Stephen
Dixon, Don


Caborn, Richard
Dobson, Frank


Callaghan, Jim
Donohoe, Brian H.


Campbell, Mrs Anne (C'bridge)
Dowd, Jim


Campbell-Savours, D. N.
Dunwoody, Mrs Gwyneth


Canavan, Dennis
Eagle, Ms Angela


Cann, Jamie
Eastham, Ken


Chisholm, Malcolm
Enright, Derek





Etherington, Bill
Miller, Andrew


Evans, John (St Helens N)
Molyneaux, Rt Hon James


Fatchett, Derek
Moonie, Dr Lewis


Fisher, Mark
Morgan, Rhodri


Flynn, Paul
Morley, Elliot


Foster, Rt Hon Derek
Morris, Estelle (B'ham Yardley)


Foulkes, George
Morris, Rt Hon J. (Aberavon)


Fyfe, Maria
Mudie, George


Galbraith, Sam
Mullin, Chris


Galloway, George
Murphy, Paul


Garrett, John
Oakes, Rt Hon Gordon


George, Bruce
O'Brien, Michael (N W'kshire)


Gerrard, Neil
O'Brien, William (Normanton)


Godman, Dr Norman A.
O'Hara, Edward


Golding, Mrs Llin
Olner, William


Grant, Bernie (Tottenham)
O'Neill, Martin


Griffiths, Win (Bridgend)
Orme, Rt Hon Stanley


Grocott, Bruce
Parry, Robert


Gunnell, John
Pendry, Tom


Hain, Peter
Pickthall, Colin


Hall, Mike
Pike, Peter L.


Hanson, David
Pope, Greg


Harvey, Nick
Prentice, Ms Bridget (Lew'm E)


Hattersley, Rt Hon Roy
Prentice, Gordon (Pendle)


Heppell, John
Prescott, John


Hill, Keith (Streatham)
Primarolo, Dawn


Hinchliffe, David
Purchase, Ken


Hoey, Kate
Quin, Ms Joyce


Hogg, Norman (Cumbernauld)
Raynsford, Nick


Hood, Jimmy
Reid, Dr John


Hoon, Geoffrey
Roche, Mrs. Barbara


Howarth, George (Knowsley N)
Rogers, Allan


Howells, Dr. Kim (Pontypridd)
Rooney, Terry


Hoyle, Doug
Ross, Ernie (Dundee W)


Hughes, Kevin (Doncaster N)
Ross, William (E Londonderry)


Hughes, Roy (Newport E)
Rowlands, Ted


Hutton, John
Ruddock, Joan


Illsley, Eric
Sedgemore, Brian


Ingram, Adam
Sheerman, Barry


Jackson, Glenda (H'stead)
Sheldon, Rt Hon Robert


Jamieson, David
Shepherd, Richard (Aldridge)


Jones, Barry (Alyn and D'side)
Shore, Rt Hon Peter


Jones, Jon Owen (Cardiff C)
Simpson, Alan


Jones, Lynne (B'ham S O)
Skinner, Dennis


Jones, Martyn (Clwyd, SW)
Smith, Andrew (Oxford E)


Kaufman, Rt Hon Gerald
Smith, C. (Isl'ton S & F'sbury)


Kennedy, Jane (Lpool Brdgn)
Smith, Rt Hon John (M'kl'ds E)


Khabra, Piara S.
Smith, Llew (Blaenau Gwent)


Lewis, Terry
Soley, Clive


Livingstone, Ken
Steinberg, Gerry


Loyden, Eddie
Stevenson, George


McAllion, John
Stott, Roger


McAvoy, Thomas
Strang, Dr. Gavin


Macdonald, Calum
Taylor, Mrs Ann (Dewsbury)


McFall, John
Taylor, Sir Teddy (Southend, E)


McKelvey, William
Trimble, David


Mackinlay, Andrew
Turner, Dennis


McLeish, Henry
Vaz, Keith


McMaster, Gordon
Walley, Joan


McNamara, Kevin
Wardell, Gareth (Gower)


Madden, Max
Wareing, Robert N


Maginnis, Ken
Watson, Mike


Mahon, Alice
Wicks, Malcolm


Mandelson, Peter
Williams, Rt Hon Alan (Sw'n W)


Marek, Dr John
Williams, Alan W (Carmarthen)


Marshall, David (Shettleston)
Wilson, Brian


Marshall, Jim (Leicester, S)
Wray, Jimmy


Martin, Michael J. (Springburn)
Wright, Dr Tony


Martlew, Eric



Maxton, John
Tellers for the Noes:


Meale, Alan
Mr. Austin Mitchell and


Michie, Bill (Sheffield Heeley)
Mr. Andrew F. Bennett.


Milburn, Alan

Question agreed to.

Question put accordingly:—

The Committee divided: Ayes 279, Noes 202.

Division No. 211]
[12.02 pm


AYES


Adley, Robert
Fabricant, Michael


Ainsworth, Peter (East Surrey)
Fenner, Dame Peggy


Aitken, Jonathan
Field, Barry (Isle of Wight)


Alexander, Richard
Fishburn, Dudley


Alison, Rt Hon Michael (Selby)
Forsyth, Michael (Stirling)


Alton, David
Forth, Eric


Amess, David
Foster, Don (Bath)


Ancram, Michael
Fowler, Rt Hon Sir Norman


Arbuthnot, James
Fox, Dr Liam (Woodspring)


Arnold, Jacques (Gravesham)
Fox, Sir Marcus (Shipley)


Ashby, David
Freeman, Roger


Ashdown, Rt Hon Paddy
Gale, Roger


Atkinson, Peter (Hexham)
Gallie, Phil


Baker, Nicholas (Dorset North)
Gardiner, Sir George


Baldry, Tony
Garel-Jones, Rt Hon Tristan


Banks, Matthew (Southport)
Garnier, Edward


Banks, Robert (Harrogate)
Gillan, Cheryl


Bates, Michael
Goodlad, Rt Hon Alastair


Batiste, Spencer
Goodson-Wickes, Dr Charles


Bellingham, Henry
Gorman, Mrs Teresa


Beresford, Sir Paul
Gorst, John


Blackburn, Dr John G.
Grant, Sir Anthony (Cambs SW)


Booth, Hartley
Greenway, Harry (Ealing N)


Boswell, Tim
Greenway, John (Ryedale)


Bottomley, Peter (Eltham)
Griffiths, Peter (Portsmouth, N)


Bottomley, Rt Hon Virginia
Grylls, Sir Michael


Bowden, Andrew
Gummer, Rt Hon John Selwyn


Brandreth, Gyles
Hague, William


Brazier, Julian
Hamilton, Rt Hon Archie (Epsom)


Bright, Graham
Hamilton, Neil (Tatton)


Brooke, Rt Hon Peter
Hampson, Dr Keith


Brown, M. (Brigg & Cl'thorpes)
Hanley, Jeremy


Browning, Mrs. Angela
Hannam, Sir John


Bruce, Ian (S Dorset)
Harris, David


Bruce, Malcolm (Gordon)
Haselhurst, Alan


Burns, Simon
Hawkins, Nick


Burt, Alistair
Hayes, Jerry


Butterfill, John
Heald, Oliver


Campbell, Menzies (Fife NE)
Heath, Rt Hon Sir Edward


Carlisle, Kenneth (Lincoln)
Heathcoat-Amory, David


Carrington, Matthew
Hendry, Charles


Cash, William
Heseltine, Rt Hon Michael


Channon, Rt Hon Paul
Hicks, Robert


Churchill, Mr
Higgins, Rt Hon Sir Terence L.


Clarke, Rt Hon Kenneth (Ruclif)
Hill, James (Southampton Test)


Clifton-Brown, Geoffrey
Hogg, Rt Hon Douglas (G'tham)


Coe, Sebastian
Horam, John


Congdon, David
Hordern, Rt Hon Sir Peter


Conway, Derek
Howard, Rt Hon Michael


Coombs, Anthony (Wyre For'st)
Howarth, Alan (Strat'rd-on-A)


Coombs, Simon (Swindon)
Howell, Rt Hon David (G'dford)


Cope, Rt Hon Sir John
Hughes Robert G. (Harrow W)


Cormack, Patrick
Hughes, Simon (Southwark)


Couchman, James
Hunt, Rt Hon David (Wirral W)


Curry, David (Skipton & Ripon)
Hunt, Sir John (Ravensbourne)


Davis, David (Boothferry)
Hunter, Andrew


Day, Stephen
Jack, Michael


Deva, Nirj Joseph
Jackson, Robert (Wantage)


Devlin, Tim
Jessel, Toby


Dickens, Geoffrey
Johnson Smith, Sir Geoffrey


Dicks, Terry
Johnston, Sir Russell


Dorrell, Stephen
Jones, Gwilym (Cardiff N)


Douglas-Hamilton, Lord James
Jones, Robert B. (W Hertfdshr)


Dover, Den
Jopling, Rt Hon Michael


Duncan, Alan
Kellett-Bowman, Dame Elaine


Duncan-Smith, Iain
Key, Robert


Dunn, Bob
Kilfedder, Sir James


Durant, Sir Anthony
King, Rt Hon Tom


Eggar, Tim
Kirkhope, Timothy


Elletson, Harold
Kirkwood, Archy


Emery, Rt Hon Sir Peter
Knight, Mrs Angela (Erewash)


Evans, David (Welwyn Hatfield)
Knight, Greg (Derby N)


Evans, Jonathan (Brecon)
Knight, Dame Jill (Bir'm E'st'n)


Evans, Nigel (Ribble Valley)
Knox, David


Evans, Roger (Monmouth)
Kynoch, George (Kincardine)


Evennett, David
Lait, Mrs Jacqui


Faber, David
Lamont, Rt Hon Norman





Leigh, Edward
Robinson, Mark (Somerton)


Lennox-Boyd, Mark
Rowe, Andrew (Mid Kent)


Lester, Jim (Broxtowe)
Rumbold, Rt Hon Dame Angela


Lidington, David
Ryder, Rt Hon Richard


Lightbown, David
Sackville, Tom


Lilley, Rt Hon Peter
Sainsbury, Rt Hon Tim


Lloyd, Peter (Fareham)
Scott, Rt Hon Nicholas


Lord, Michael
Shaw, David (Dover)


Luff, Peter
Shaw, Sir Giles (Pudsey)


Lyell, Rt Hon Sir Nicholas
Shephard, Rt Hon Gillian


MacGregor, Rt Hon John
Shepherd, Colin (Hereford)


MacKay, Andrew
Shepherd, Richard (Aldridge)


Maclean, David
Shersby, Michael


McLoughlin, Patrick
Smith, Tim (Beaconsfield)


Madel, David
Soames, Nicholas


Maitland, Lady Olga
Spencer, Sir Derek


Major, Rt Hon John
Spicer, Sir James (W Dorset)


Malone, Gerald
Spink, Dr Robert


Mans, Keith
Spring, Richard


Marland, Paul
Sproat, Iain


Marshall, John (Hendon S)
Squire, Robin (Hornchurch)


Marshall, Sir Michael (Arundel)
Stanley, Rt Hon Sir John


Martin, David (Portsmouth S)
Steen, Anthony


Mates, Michael
Stephen, Michael


Mawhinney, Dr Brian
Stewart, Allan


Mayhew, Rt Hon Sir Patrick
Streeter, Gary


Mellor, Rt Hon David
Sumberg, David


Merchant, Piers
Sweeney, Walter


Michie, Mrs Ray (Argyll Bute)
Sykes, John


Milligan, Stephen
Tapsell, Sir Peter


Mitchell, Andrew (Gedling)
Taylor, John M. (Solihull)


Mitchell, Sir David (Hants NW)
Taylor, Sir Teddy (Southend, E)


Monro, Sir Hector
Temple-Morris, Peter


Montgomery, Sir Fergus
Thomason, Roy


Moss, Malcolm
Thompson, Sir Donald (C'er V)


Needham, Richard
Thornton, Sir Malcolm


Nelson, Anthony
Thurnham, Peter


Neubert, Sir Michael
Townsend, Cyril D. (Bexl'yh'th)


Newton, Rt Hon Tony
Tracey, Richard


Nicholls, Patrick
Tredinnick, David


Nicholson, David (Taunton)
Trotter, Neville


Norris, Steve
Twinn, Dr Ian


Onslow, Rt Hon Sir Cranley
Tyler, Paul


Ottaway, Richard
Vaughan, Sir Gerard


Page, Richard
Waldegrave, Rt Hon William


Paice, James
Walden, George


Patnick, Irvine
Walker, Bill (N Tayside)


Patten, Rt Hon John
Wallace, James


Pattie, Rt Hon Sir Geoffrey
Waller, Gary


Pawsey, James
Wardle, Charles (Bexhill)


Peacock, Mrs Elizabeth
Waterson, Nigel


Pickles, Eric
Wells, Bowen


Porter, Barry (Wirral S)
Wheeler, Rt Hon Sir John


Portillo, Rt Hon Michael
Whitney, Ray


Powell, William (Corby)
Widdecombe, Ann


Rathbone, Tim
Wiggin, Sir Jerry


Redwood, John
Willetts, David


Renton, Rt Hon Tim
Wolfson, Mark


Richards, Rod
Yeo, Tim


Riddick, Graham
Young, Sir George (Acton)


Rifkind, Rt Hon. Malcolm



Robathan, Andrew
Tellers for the Ayes:


Roberts, Rt Hon Sir Wyn
Mr. Sydney Chapman and


Robertson, Raymond (Ab'd'n S)
Mr. Timothy Wood.


NOES


Abbott, Ms Diane
Blair, Tony


Adams, Mrs Irene
Blunkett, David


Ainger, Nick
Boyce, Jimmy


Ainsworth, Robert (Cov'try NE)
Boyes, Roland


Allen, Graham
Bradley, Keith


Anderson, Donald (Swansea E)
Bray, Dr Jeremy


Anderson, Ms Janet (Ros'dale)
Brown, Gordon (Dunfermline E)


Armstrong, Hilary
Burden, Richard


Barnes, Harry
Byers, Stephen


Battle, John
Caborn, Richard


Bayley, Hugh
Callaghan, Jim


Beckett, Rt Hon Margaret
Campbell, Mrs Anne (C'bridge)


Benn, Rt Hon Tony
Campbell-Savours, D. N.


Betts, Clive
Canavan, Dennis






Cann, Jamie
Gerrard, Neil


Chisholm, Malcolm
Godman, Dr Norman A.


Clapham, Michael
Golding, Mrs Llin


Clark, Dr David (South Shields)
Grant, Bernie (Tottenham)


Clarke, Eric (Midlothian)
Griffiths, Nigel (Edinburgh S)


Clarke, Tom (Monklands W)
Griffiths, Win (Bridgend)


Clelland, David
Grocott, Bruce


Clwyd, Mrs Ann
Gunnell, John


Cohen, Harry
Hain, Peter


Connarty, Michael
Hall, Mike


Corbett, Robin
Hanson, David


Corbyn, Jeremy
Harvey, Nick


Corston, Ms Jean
Heppell, John


Cousins, Jim
Hill, Keith (Streatham)


Cryer, Bob
Hinchliffe, David


Cummings, John
Hoey, Kate


Cunliffe, Lawrence
Hogg, Norman (Cumbernauld)


Cunningham, Jim (Covy SE)
Hood, Jimmy


Darling, Alistair
Hoon, Geoffrey


Davidson, Ian
Howarth, George (Knowsley N)


Davies, Rt Hon Denzil (Llanelli)
Howells, Dr. Kim (Pontypridd)


Davies, Ron (Caerphilly)
Hoyle, Doug


Davis, Terry (B'ham, H'dge H'l)
Hughes, Kevin (Doncaster N)


Denham, John
Hughes, Roy (Newport E)


Dewar, Donald
Hutton, John


Dixon, Don
Illsley, Eric


Dobson, Frank
Ingram, Adam


Donohoe, Brian H.
Jackson, Glenda (H'stead)


Dowd, Jim
Jamieson, David


Dunwoody, Mrs Gwyneth
Jones, Barry (Alyn and D'side)


Eagle, Ms Angela
Jones, Jon Owen (Cardiff C)


Eastham, Ken
Jones, Lynne (B'ham S O)


Enright, Derek
Jones, Martyn (Clwyd, SW)


Etherington, Bill
Kaufman, Rt Hon Gerald


Evans, John (St Helens N)
Kennedy, Jane (Lpool Brdgn)


Fatchett, Derek
Khabra, Piara S.


Fisher, Mark
Lewis, Terry


Flynn, Paul
Livingstone, Ken


Foster, Rt Hon Derek
Loyden, Eddie


Foulkes, George
McAllion, John


Fyfe, Maria
McAvoy, Thomas


Galbraith, Sam
McCartney, Ian


Galloway, George
Macdonald, Calum


Gapes, Mike
McFall, John


Garrett, John
McKelvey, William


George, Bruce
Mackinlay, Andrew





McLeish, Henry
Quin, Ms Joyce


McMaster, Gordon
Raynsford, Nick


McNamara, Kevin
Reid, Dr John


Madden, Max
Roche, Mrs. Barbara


Maginnis, Ken
Rogers, Allan


Mahon, Alice
Rooney, Terry


Mandelson, Peter
Ross, Ernie (Dundee W)


Marek, Dr John
Ross, William (E Londonderry)


Marshall, David (Shettleston)
Rowlands, Ted


Marshall, Jim (Leicester, S)
Ruddock, Joan


Martin, Michael J. (Springburn)
Sedgemore, Brian


Martlew, Eric
Sheerman, Barry


Maxton, John
Sheldon, Rt Hon Robert


Meale, Alan
Shore, Rt Hon Peter


Michie, Bill (Sheffield Heeley)
Simpson, Alan


Milburn, Alan
Skinner, Dennis


Miller, Andrew
Smith, Andrew (Oxford E)


Molyneaux, Rt Hon James
Smith, C. (Isl'ton S & F'sbury)


Moonie, Dr Lewis
Smith, Rt Hon John (M'kl'ds E)


Morgan, Rhodri
Smith, Llew (Blaenau Gwent)


Morley, Elliot
Soley, Clive


Morris, Estelle (B'ham Yardley)
Steinberg, Gerry


Morris, Rt Hon J. (Aberavon)
Stevenson, George


Mudie, George
Stott, Roger


Mullin, Chris
Strang, Dr. Gavin


Murphy, Paul
Taylor, Mrs Ann (Dewsbury)


Oakes, Rt Hon Gordon
Trimble, David


O'Brien, Michael (N W'kshire)
Turner, Dennis


O'Brien, William (Normanton)
Vaz, Keith


O'Hara, Edward
Walley, Joan


Olner, William
Wardell, Gareth (Gower)


O'Neill, Martin
Wareing, Robert N


Orme, Rt Hon Stanley
Watson, Mike


Parry, Robert
Wicks, Malcolm


Pendry, Tom
Williams, Rt Hon Alan (Sw'n W)


Pickthall, Colin
Williams, Alan W (Carmarthen)


Pike, Peter L.
Wilson, Brian


Pope, Greg
Wray, Jimmy


Prentice, Ms Bridget (Lew'm E)
Wright, Dr Tony


Prentice, Gordon (Pendle)



Prescott, John
Tellers for the Noes:


Primarolo, Dawn
Mr. Austin Mitchell and


Purchase, Ken
Mr. Andrew Bennett.

Question accordingly agreed to.

Committee report Progress; to sit again tomorrow.

Orders of the Day — NHS Drugs Bill

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert G. Hughes.]

Mr. Andrew Hunter: At long last, Mr. Deputy Speaker! I greatly welcome this delayed opportunity to raise the subject of the cost of drugs to the national health service and to reflect the disquiet which is expressed by a number of people at a perceived trend in Government's thinking, a disquiet which I share. My only regret about this debate is that I am adding to the burdens on the time of my hon. Friend the Member for Bolton, West (Mr. Sackville) and I apologise to him for that.
Reduced to simplicity, my concern is that Government policy may unintentionally undermine the smooth running of aspects of the workings of the national health service, to the detriment of patients' interests. I further fear that any extension of the selected list scheme, the SLS, could have long-term adverse repercussions for the United Kingdom pharmaceutical industry, an industry which has a significant presence in my Basingstoke constituency. Either development would be undesirable; the possibility of both is alarming.
The greater part of my remarks will be devoted to what I regard as three fallacies in the debate about the size of the drugs bill and about the SLS. The first fallacy relates to a particular policy development. Recently, the Department of Health was understood to have stated that its aim is to keep the rise in the drugs bill in line with retail prices index inflation. I fear that this an inappropriate target.
In view of the continuing recession and deteriorating public finances, it may unfortunately be necessary to keep total NHS spending in line with inflation, despite the 1992 general election commitment to an increase in real terms, but the emphasis on keeping increases in the drugs bill in line with RPI inflation is a disturbing departure and one which should be challenged. Surely the strategic objective should be to ensure that the best use is made of finite resources. How best to achieve this optimum use of finite resources should determine the level of spending on each individual element within the overall total. The factor that determines the size of the bill as a proportion of total NHS expenditure should be whether more or less use of medicines represents the best use of total resources. The Government are, I fear, open to the charge that, in concentrating excessively on one element within total expenditure—the drugs bill—they are losing sight of the wider implications and consequences of such action.
My thesis is simple: further attempts to control the drugs bill are likely to undermine the provision of primary and community health care and, therefore, put greater strain on resources by increasing demand for secondary and more expensive health care.
The second fallacy is the belief that the increase in the drugs bill is significantly due to price increases. That is entirely mistaken. NHS pharmaceutical expenditure has certainly grown ahead of RPI inflation, but this must be seen in its true context. All health care inflation is historically higher than general inflation, for three main reasons. One is demographic change—primarily the aging population. Secondly, there is technological advance, as more and more costly medicines become available. Thirdly, there is apparently insatiable consumer demand.
It is not surprising that the rise in health care costs is an increasing concern for many Governments. Throughout Europe and in the United States, Governments have introduced a variety of measures to contain health care expenditure in general and drugs bills in particular.
My hon. Friend the Minister will know that industry and Department of Health data on the nature of the growth in the NHS drugs bill are complex, but show similar trends. There is a broad consensus on several features. Price rises and the introduction of new products are a consistently small contributor to year-on-year growth, generally accounting for 1 to 2 per cent. each of the total percentage increase.
The Department attributes "product mix", defined as average net ingredient cost, as the main growth. However, the increase in average net ingredient cost has remained steady or slow during the past five years. Conversely, the number of prescription items has increased and now represents a larger percentage of total growth than at any time during the past five years.
The reality is far removed from the mistaken belief that the increase in the drugs bill is significantly due to price increases. It is not difficult to detect the primary cause for the increase in the drugs bill—it is Government policy.
During the past decade or more, there has been a gradual shift from a health service based primarily on secondary, or hospital, provision to a service based on care in the primary sector by general practitioners. The trend has been confirmed by NHS reforms and by moves toward community care, both of which I welcome. The trend was confirmed in the White Paper, "The Health of the Nation". The Government's response to the Tomlinson report, which endorsed fewer hospitals and an increase in primary care, and is further evidence of that trend.
The inevitable corollary of a shift to primary care is the present increase in the NHS drugs bill. Both in absolute terms and as a proportion of total NHS expenditure, it is a classic illustration of money following the patient. A clear correlation can be drawn between the introduction of a new GP contract and the drugs bill. Many instances show how increased prescribing followed the introduction of the new contracts and correspondingly contributed to increases in the drugs bill. Inevitably, more prescriptions are being written and the cost of drugs prescribed has increased the total drugs bill.
The third fallacy is the argument that an ever-increasing drugs bill is taking up too great a share of a finite NHS resource, to the detriment of the service as a whole. Again, the reality is very different. There are many published examples to show that increased expenditure on medicines reduces the overall cost to the health service. Perhaps the most dramatic example has been the reduction in major gastric surgery, which has been brought about by the use of H2-receptor blocking agents, such as Zantac and Tagamet, which, incidentally, were both discovered and developed in the United Kingdom.
One survey shows that those medicines have increased drug costs for ulcer patients sixfold, but have reduced the total treatment costs by 66 per cent. It is therefore entirely misleading merely to judge matters by the increase in the cost of the drugs, when the overall saving to the service can be so much greater. Significantly, the Office of Health Economics calculates that, as a result of the reduction in hospital bed days, savings from seven groups of diseases had amounted to nearly £4 billion a year by 1991. By contrast, the cost of all medicines prescribed in general


practice for all diseases in that year was only £3·3 billion. The overall message is simply that medicines are a very cost-effective way of spending health care resources.
I turn, penultimately, to the way forward. I believe that there are questions to be answered, and I put them to my hon. Friend the Minister. First, will not he accept that it is illogical to seek to index-link the growth in the NHS drugs bills to inflation? Secondly, does not he accept that, as Government policy is to shift the balance of health care from hospital provision to treatment by GPs in the primary sector, medicines will consume an ever-higher proportion of total NHS resources? Thirdly, does not he accept that price rises and the introduction of new products are relatively small contributors to the overall rise in the drugs bill? Fourthly, what will be the implications for the provision of health care within the Government's overall strategy if further restrictions on the use of medicines are introduced? Surely this is a matter for an urgent, in-depth inquiry. Lastly, what will be the implications for the pharmaceutical industry if the market is further restricted by an extension of the SLS? The United Kingdom is greatly indebted to the pharmaceutical industry as an investor, employer and innovating producer. Will investment, employment and innovation continue?
My thesis is straightforward. Noises coming from the Department of Health warn that, in their reaction to the rising NHS drugs bill, the Government may be on the point of pursuing a mistaken course of action. Trends within the health service rightly emphasise the importance of primary and community health care. This inevitably results in increased prescribing. But devoting resources to medicines is a most cost-effective use of those resources, as it reduces demand for more expensive secondary health care. An extension of the SLS would have a detrimental effect on the United Kingdom pharmaceutical industry, with repercussions for employment and investment.
Finally, further restrictions on the availability of medicines would not be in the patient's interests. They could undermine the reforms and the smooth running of the national health service. I rest my case.

The Parliamentary Under-Secretary of State for Health (Mr. Tom Sackville): I begin by congratulating my hon. Friend the Member for Basingstoke (Mr. Hunter) on his success in the ballot for an Adjournment debate and on his choice of subject.
The question of the cost of drugs to the national health service is a complex one, requiring a balance to be struck between the need to ensure that patients get the drugs they really need, the encouragement of a research-based pharmaceutical industry and the need to contain costs. It is right and proper that those issues should be the subject of public debate.
I must start by correcting something my hon. Friend said at the beginning of his speech. It is not, as he suggested, our aim to keep the rise in the drugs bill in line with GDP inflation. But it is our aim to reduce the annual rise in the drugs bill to something closer to the rate of inflation.
Over the 10 years 1982–83 to 1991–92 the total drugs bill for the NHS in England rose from £1·2 billion to £2·9 billion—an increase of 39 per cent. in real terms. Over those 10 years, the cost of drugs prescribed in the family

health service has risen from 8·2 per cent. of total expenditure on the NHS in England to 8·7 per cent. Indeed, in 1989–90 it was as high as 9·2 per cent. In total, expenditure on the family health service drugs bill reached £2·3 billion in England in 1991–92, and is likely to increase by a further 14 per cent. this year.
The reasons for the rise in the family health service drugs bill are complex and, not surprisingly, the Government's analysis differs in some respects from the industry's. As we have in Britain a good record of co-operation between industry and the Government, we are keen to reconcile those differences. We have, therefore, agreed that officials of the Department will meet the Association of British Pharmaceutical Industry to discuss our respective analyses, and seek to agree a common basis for assessing the causes of the rise in the NHS drugs bill. Undoubtedly, some of the rise is due to changes in demography, but we should not exaggerate the importance of those factors. Much more important is the fact that doctors have been writing more prescriptions per head of the population and that those prescriptions have been becoming more and more expensive. Over the 10-year period, the number of prescriptions has risen from 332 million to 415 million—an increase of a quarter. We expect the number of prescriptions to rise by a further 4 per cent. this year. The average cost of a prescription has risen from £3·04 to £5·58, an increase of 84 per cent. in cash terms or 10 per cent. in real terms.
One issue on which we can broadly agree is that increases in the prices of medicines that are already on the market have not contributed very much to the increased cost. Over the past five years, the average ingredient cost of a prescription has gone up by just under 8 per cent. each year. Of that 8 per cent., only about 1 per cent. is due to price increases for medicines already on the market. Just over 1 per cent. of the annual 8 per cent. increase has been due to a continuing rise in the average quantity of medicine in each prescription. But the bulk of the rise in the average cost of a prescription is accounted for by what might best be described as the product mix—changes in the medicines that are being prescribed. Newer medicines are taking the place of the older medicines whose prices, as we have seen, have not been increasing very much. Those new medicines have a very substantial price premium over existing medicines—on average about 150 per cent.—even when they are very similar in therapeutic effect. The switch to newer medicines has been offset to some extent by an increase in the proportion of prescriptions that could be dispensed using generic medicines, which has risen from 16 per cent. in 1982 to 35 per cent. in 1992.
Of course, people are becoming more health conscious. Some new medicines are more effective than older ones, while some new medicines treat conditions that previously could not be treated at all. But, likewise, there is no bottomless pit of cash for the health service. It is all the more important, therefore, for us to seek to ensure that the money that is spent on medicines is well spent. Our policies seek to ensure that by action on two main fronts—first, to ensure that we are not paying more than we need to for an effective range of modern medicines and, secondly, to encourage better prescribing.
The proposals for the extension of the selected list are part of the first of these areas of action. As my hon. Friends knows, the selected list scheme was introduced in 1985 and included seven therapeutic categories of drugs. Experience with the scheme has shown that the drugs bill


can be reduced without detriment to patients, and we have therefore asked the Advisory Committee on NHS Drugs to see whether similar savings can be made in other categories.
There are no targets for savings from extending the selected list scheme and decisions on which individual drugs may no longer be available on NHS prescription will be taken only on the basis of advice from the advisory committee. That is an independent body of experienced doctors, dentists and pharmacists who have been appointed, following nomination by the relevant professional organisations. Their remit is to ensure that drugs to meet all real clinical need can be provided as economically as possible under the NHS.

Mrs. Teresa Gorman: I thank my hon. Friend for giving way and for his courtesy in the recent past when I have been to see him about the selected list. Will he give us the make-up of the advisory committee and state, in particular, whether it contains any young women who are likely to be taking oral contraceptives? As he knows, I am most concerned that adding oral contraceptives to the limited list could cause much distress to young women taking the pill. The change in prescription can have a profound effect, not just on the women's physical reaction, but on their mood. The long-term effects of giving up oral contraceptives could be an increase in abortions and in the cost of maintaining unwanted children. As my hon. Friend said, we could be penny wise and pound foolish.

Mr. Sackville: I shall let my hon. Friend have a complete list of the members of the committee. I assure her that they represent a fair cross-section and that the committee contains a number of experts on oral contraception who will be well aware of the factors that my hon. Friend has outlined. I look forward to receiving further representations from her if she wishes to make them.
I was speaking about the general criteria. Drugs will not be rejected purely on grounds of cost and the committee will take full account of patients' needs as well as the therapeutic value of the drugs under review.
We cannot predict which products will be affected by those changes, but I can offer reassurance that manufacturers will be informed as soon as possible if their products are to be considered by the committee. They will also be given an opportunity to make representations to the committee against any provisional view that a product should not be prescribable under the NHS.
I appreciate that there is concern about the timing of the changes and, while it is not possible at this stage to announce the dates on which the committee will be reviewing the drugs in the new therapeutic categories, preliminary work is already under way and we intend to announce further details of the products involved later in the year.
I know that there is serious concern about the impact that the changes may have on research, investment and employment in the drugs industry. The changes that we are introducing mirror measures being taken throughout Europe to limit the growth of drugs bills. Investment in the United Kingdom pharmaceutical industry and decisions on product development depend on a number of factors in

both the United Kingdom and other key pharmaceutical markets. Therefore, it is not possible to identify separately the impact of the proposed extension to the selected list scheme from that of other changes in both the United Kingdom and other countries.
In the same area are the arrangements for controlling, indirectly, the price of branded prescription drugs sold to the NHS through the pharmaceutical price regulation scheme. This is a voluntary agreement, negotiated between the Department of Health and the pharmaceutical industry, which regulates the profits that companies may make from the sale of drugs to the NHS.
The present scheme, which was agreed in 1986, is now being renegotiated with the ABPI. The scheme has been successful in its purpose of making drugs available to the NHS at reasonable prices while encouraging the development of a strong and innovative pharmaceutical industry.
It is essential that any new agreement continues to achieve those objectives. The scheme is voluntary, of course, and depends on the co-operation of the industry. The discussions taking place between the Department and industry representatives involve a recognition by both sides that the rate of growth in the drugs bill needs to be limited, and that constraint in the pricing of new drugs has a role to play, along with the other initiatives that I have mentioned.
As well as ensuring that we are not paying more than we need for an effective range of modern medicines, we are also taking action to encourage better prescribing. Let me stress the word "better". We are seeking to improve the care of patients, not just to cut costs, although, of course, cutting out wasteful and unnecessary prescribing is part of improving prescribing. I have time to refer only briefly to the steps that we are taking.
First, all GPs are given details of their prescribing costs every month through prescribing analyses and cost data—PACT. Secondly, professional advice about prescribing is now available in all family service authorities through the medical advisers and, increasingly, also through pharmaceutical advisers. Those advisers are the NHS's main resource in the field, working through the regular face-to-face visits to GPs. In addition, all FHSAs, regions, and my Department now have electronic access to PACT data on a monthly basis. We now have the means to analyse variation from the GP across regions. Understanding what is happening is clearly vital if we are to target further initiatives to improve prescribing.
Finally, there are the fund-holding and indicative prescribing schemes. We have just introduced a new drug budget system for the indicative prescribing and fund holding schemes. The new system retains budget setting at practice level based on identified need, but it also ensures that budgets, when aggregated, are set with regard to the estimated requirements for prescribing at regional and national level.
GP fund holders have a direct interest in improving the cost effectiveness of prescribing. They can retain any savings on drugs to reduce the demand on the hospital referral element of their budget. That is not just theory. In 1991–92, fund holders' prescribing costs increased by an average of 3 per cent. less than those of other GPs—and without any loss of quality. And that was starting from a baseline cost 10 per cent. lower than other GPs. All the indications are that that trend will be repeated this year.
Up to now, however, the majority of GPs have had no direct incentive to prescribe economically, because there has been no visible and direct reward for the patients in their practices. On 11 March, my hon. Friend the Minister for Health invited regions to submit proposals for incentive schemes for GPs who prescribe economically. Those schemes will have to be agreed with the Department. If acceptable, they will operate on a pilot basis from 1 April. GPs whose prescribing costs fall below a target level will be able to retain part of their savings to spend on improving services for their patients.
I echo my hon. Friend's remarks and I want to acknowledge and to applaud the major contribution that the pharmaceutical industry makes to the economy of the country. The pharmaceutical industry in Britain has a record of which it can be proud, in terms of production, exports, research and employment. Although Britain is only 3 per cent. of the world market, our industry provides some 6 per cent. of the world production, making us the sixth largest producer. In 1991, the industry in Britain had record exports of £2·5 billion, and a record balance of trade surplus of £1·2 billion. Much of that success is due

to a record on innovation which is second to none, thanks to the quality of its research efforts. I understand that investment in R and D reached £1·2 billion in 1991, which represents some 8 per cent. of the world R and D expenditure. The industry employs more than 87,000 people in the United Kingdom, of which some 18,000 are scientists and technicians working on medical research and development.
We are all well aware of that fine record, and we do not wish to cause any harm, but we must ensure that the money that is spent on medicines is well spent. I have tried to show that we are addressing this need in a balanced way through a number of different schemes—striving both to ensure that we are not paying more than we need to or more than is reasonable for an effective range of modern medicines, and to encourage better prescribing. I have also tried to show that we are not deaf to the legitimate needs and concerns of the industry, and that we will take those into account as we take our policies forward.

Question put and agreed to.

Adjourned accordingly at eighteen minutes to One o'clock.